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Report and Recommendation of the President to the Board of Directors

Project Number: 42189 October 2008

Proposed Asian Development Fund Grant Republic of Tajikistan: Nurek 500 kV Switchyard Reconstruction Project

CURRENCY EQUIVALENTS (as of 15 October 2008) Currency Unit TJS1.00 $1.00 – = = somoni (TJS) $0.2941 TJS3.40

ABBREVIATIONS ADB AIS EA EIRR FIRR GIS HEPP IEE IFI IFRS IPP KfW LAR PMU TALCO WACC – – – – – – – – – – – – – – – – Asian Development Bank air-insulated switchgear executing agency economic internal rate of return financial internal rate of return gas-insulated switchgear hydroelectric power plant initial environmental examination international financial institution International Financial Reporting Standards independent power producer Kreditanstalt für Wiederaufbau (Credit Institute for Reconstruction) land acquisition and resettlement project management unit Tajikistan Aluminum Company weighted average cost of capital

WEIGHTS AND MEASURES GWh kV kW kWh MW MWh – – – – – – gigawatt-hour (1 million kilowatt-hours) kilovolt (1,000 volts) kilowatt (1,000 watts) kilowatt-hour, unit of electrical energy (1 kilowatt for 1 hour) megawatt (1,000 kilowatts) megawatt-hour (1,000 kilowatt-hours)

NOTES (i) The fiscal year (FY) of the Government and Barki Tajik ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2008 ends on 31 December 2008. In this report, "$" refers to US dollars.

(ii)

Vice-President Director General Director Team leader Team members

X. Zhao, Operations Group 1 J. Miranda, Central and West Asia Department (CWRD) H. Wang, Infrastructure Division, CWRD J. Liston, Principal Energy Specialist, CWRD R. Jayewardene, Senior Social Development Specialist, CWRD T. Kadono, Energy Specialist, CWRD B. Konysbayev, Counsel, Office of the General Counsel R. Sadykov, Project Implementation Officer, CWRD R. Sanda, Investment Specialist, CWRD J. Weinstock, Senior Environment Specialist, CWRD

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Outputs C. Environmental Impact D. Design and Monitoring Framework 2. Financial Assessment of Barki Tajik 10. Summary of Financial Analysis 11. External Assistance to the Power Sector 4. Executing Agency PROJECT BENEFITS. AND OPPORTUNITIES A. Social and Poverty Impacts C. IV. AND RISKS A. Financial and Economic Benefits B. Summary of Economic Analysis 8. PROBLEMS. Implementation Arrangements G. Implementation Schedule 6. Condition for Grant Effectiveness C. Special Features D. V. Indicative Procurement Plan 7. VI. IMPACTS. Summary Poverty Reduction and Social Strategy 9. Performance Indicators and Analysis B. Specific Assurances B. Analysis of Key Problems and Opportunities THE PROPOSED PROJECT A. Financing Plan F. APPENDIXES 1. Outline Terms of Reference for Consultants 19 20 25 26 27 28 32 37 40 45 49 . THE PROPOSAL RATIONALE: SECTOR PERFORMANCE. ASSUMPTIONS. Impact and Outcome B. Condition for Disbursement RECOMMENDATION 1 1 1 2 6 6 6 6 6 7 7 10 12 12 13 13 14 15 15 17 18 18 i III.CONTENTS Page GRANT AND PROJECT SUMMARY MAP I. Project Risks and Assumptions ASSURANCES AND CONDITIONS A. Sector and Subsector Analysis 3. Project Investment Plan 5. II. Investment Plan E.

Financial Projections for Barki Tajik F.SUPPLEMENTARY APPENDIXES (available upon request) A. Initial Environmental Examination C. Detailed Financial Assessment of Barki Tajik E. Detailed Economic Analysis D. Social Analysis B. Summary Initial Environmental Examination .

requiring major ongoing remedial measures. There are risks for both switchyards that a catastrophic event may occur at any time. A 2006 feasibility study recommended that the equipment in both switchyards be retired. Kyrgyz Republic. The Government of Tajikistan (the Government) considers the reconstruction of the switchyards to be emergency projects due to the deteriorating equipment and unstable geological site conditions that could result in the potential loss of major output from the Nurek HEPP for lengthy periods. incorporating 220 kV and 500 kV switchyards. Ground stabilization measures are considered impractical.GRANT AND PROJECT SUMMARY Recipient Classification Republic of Tajikistan Targeting classification: General intervention Sector: Energy Subsector: Transmission and distribution Themes: Sustainable economic growth. which includes the electricity systems of Kazakhstan. The existing 500 kV equipment will be dismantled and will mostly be used as spare parts for other 500 kV substations. and Uzbekistan. This is due to an extensive salt dome in the vicinity of the switchyards that destabilizes the ground conditions during snow melt and rain. The Nurek 500 kV Switchyard Reconstruction Project (the Project) will build a new Nurek 500 kV switchyard on a new site within the Nurek Hydroelectric Power Plant (HEPP) complex to replace the existing Nurek 500 kilovolt (kV) switchyard. with new switchyards to be built on secure ground. thereby destroying major parts of the switchgear. The study recommended that the least-cost option was to Environment Assessment Project Description Rationale . capacity development Subthemes: Fostering physical infrastructure development. They are therefore in need of complete replacement. The existing switchyards were built more than 30 years ago with Soviet technology and replacement parts are no longer available. An initial environmental examination has been conducted and is in Supplementary Appendix B. Nurek HEPP. institutional development Category B. Severe subsidence in areas of the switchyards has been occurring for many years. produces over 70% of Tajikistan's electricity and performs a frequency regulation role for the Central Asian power system. Turkmenistan.

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utilize a portion of the land where the existing 220 kV switchyard is currently located for both new switchyards. The ground conditions of the proposed new site have been verified as satisfactory by geological investigation. Gas-insulated switchgear technology, which uses approximately 10% of the area required by conventional air-insulated switchgear technology, is required due to the restricted area of the proposed new site. The Government signed a loan agreement with the German Development Cooperation through Kreditanstalt für Wiederaufbau (Credit Institute for Reconstruction) in August 2008 for the financing of the new 220 kV gas-insulated switchgear switchyard, with a projected completion date of April 2011. The Project under Asian Development Bank (ADB) financing will complete the required rehabilitation of the switchyards. Impact and Outcome The impact is sustainable and reliable electricity supply to support economic development. It will mitigate the risk of natural disasters disabling the switchyard, and will stabilize the flow of electricity coming from the strategically important Nurek HEPP. The outcome is the reliable evacuation of Nurek HEPP electricity to the grid. Project Investment Plan The investment cost of the Project is estimated at $66.90 million, including taxes and duties of $9.4 million.
Table 1: Tentative Project Investment Plan ($ million) Item A. B. C. Base Cost Contingencies Financing Charges During Implementation Total Estimated Amount 58.78 5.86 2.26 66.90

Source: Asian Development Bank estimates.

Financing Plan

Table 2: Tentative Financing Plan ($ million) Source Asian Development Bank Government and Barki Tajika Total
a

Amount 54.77 12.13 66.90

Share (%) 81.9 18.1 100.0

Barki Tajik is the state-owned utility responsible for generation, transmission, and distribution of electricity in Tajikistan excluding Pamir region. Source: Asian Development Bank estimates.

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Allocation and Relending Terms

Allocation A grant of $54.77 million will be provided from ADB’s Special Funds resources to the Government. Relending The Government will lend the proceeds of the grant to Barki Tajik under a subsidiary loan agreement which will require Barki Tajik to repay the loan to the Government at an interest rate of 5% per annum over a tenor of 25 years, including a 5-year grace period. Use of Subsidiary Loan Repayments The Government shall ensure that receipt of repayments of principal and interest by Barki Tajik arising from the subsidiary loan agreement will be used exclusively for Government tariff subsidies for poor and vulnerable electricity consumers.

Estimated Project Completion Date

The Project will be implemented over a 5-year period commencing in February 2009. The duration of the turnkey contract will be approximately 3 years, including the 1-year guarantee period between the taking over and the completion of the warranty period. The estimated project completion date is 31 January 2014. The period of utilization is until 31 July 2014. Barki Tajik Joint Stock Holding Company, the 100% state-owned and vertically integrated power utility company and owner of Nurek HEPP. The Government has created a state agency to act as an independent project management unit to coordinate and implement power projects that are funded through loans and grants from bilateral donors and international financing institutions. Barki Tajik shall employ the services of the project management unit for day-to-day management of the Project and shall be the party to sign all contracts with consultants and contractors employed on the Project. One turnkey contract for the entire Project will be procured by Barki Tajik using international competitive bidding in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). A total of 85 person-months of consulting services, comprising mostly international consultants, will be required for the Project. One consulting firm will be recruited as the implementation consultant, to be selected and engaged by Barki Tajik in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). Quality- and cost-based selection method with weighting of 90:10 will be adopted, since the consequences of poor performance could be high, leading to catastrophic economic, financial, and social losses.

Executing Agency

Implementation Arrangements

Procurement

Consulting Services

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Project Benefits and Beneficiaries

The primary beneficiaries of the Project will be business enterprises and the population who will benefit from a stable supply of electricity services and long-term cost reductions resulting from economic dispatch of electricity from the Nurek HEPP and the overall efficiencies gained from enhanced transmission through the new switchyards. The financial internal rate of return of the Project is estimated at 9.3% and the economic internal rate of return is estimated at 36.7%. The Project is technically complicated given its advanced technology content and the need for the two new switchyards to be integrated both with each other and with the existing power station. However, the overall technical risk is deemed to be low. Rehabilitation of the nine turbine and generators of Nurek HEPP is not included in the Project but will need to be carried out in the medium term. It is assumed that total failure of Nurek HEPP will not occur as the nine units operate independently of each other and any one unit can be repaired and rehabilitated at the time of failure, as has been recent practice. At a policy level, it is assumed that the Government (i) will implement full cost-recovery tariffs, and (ii) is committed to making available the necessary investments to rehabilitate and develop the electricity sector. At an institutional level, it is assumed that Barki Tajik will (i) implement needed reforms with the modernization of its management, governance, and corporate procedures; and (ii) deliver on its assurances to improve collection levels and adequately fund operation and maintenance.

Risks and Assumptions

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2%).326 megawatts (MW).006 per kilowatt-hour (kWh). Tajikistan has implemented three tariff increases and is on schedule to bring the average tariff to a financially viable level of $0. and completion of the Sangtuda I Hydroelectric Power Plant (HEPP). RATIONALE: SECTOR PERFORMANCE. physical infrastructure continues to deteriorate. and with Tajikistan Aluminum Company (TALCO) accounting for approximately 44. Investments in the power sector since the break-up of the former Soviet Union have been limited to emergency rehabilitation measures. As a result. and has excess water during summer.3% of total industrial use. at about 0. The high percentage usage by industry and agriculture reflects the subsidized nature of the tariffs to these groups. the current tariffs have been increased so that they are closer to the financial viability levels. Per capita domestic energy consumption. II. Until recently. 4. is very high given the country's level of economic development. I submit for your approval the following report and recommendation on a proposed grant to the Republic of Tajikistan for the Nurek 500 kV Switchyard Reconstruction Project (the Project). PROBLEMS. commercial losses are high. of which 98% is hydroelectric power-based. In the gas sector. Meanwhile. agriculture (15%). a joint stock company 100% owned by the state. A. The power sector alone represents up to 5% of gross domestic product and is a critical input for the main exports of cotton and aluminum. a metering project. leading to high network losses and reduced reliability. a new 500 kilovolt (kV) transmission line. 6. Tajikistan possesses vast amounts of hydroelectric (40 gigawatts [GW]) and coal (3. 8. This is because of the low end-use efficiency and high heating requirements during winter. Coal prices are market based. The predominance of hydroelectric energy creates a problem as hydropower production exceeds demand in summer and is reduced in winter when glacial melt is least and demand is most. of which only a small fraction (less than 10% of the hydroelectric and negligible coal) has been developed. households have switched from organic fuels to electricity for heating and cooking. Since 2007.025/kWh (in 2008 terms) by 2010. 3. Meanwhile. consisting of a network of 10 subsidiary power generation . Barki Tajik Joint Stock Holding Company. the country faces energy deficits and cannot meet its winter demand. with the average tariff in 2006 of $0. Tajikistan has an installed generation capacity of 4. With the rise in prices of imported fuel. Electricity consumption in 2005 was 15 million gigawatt-hours (GWh). is a vertically integrated utility. 5. and households (28.I. Tajikistan imports electricity and fossil fuels in winter to meet energy needs. AND OPPORTUNITIES Performance Indicators and Analysis 2. The design and monitoring framework of the Project is in Appendix 1. THE PROPOSAL 1. with the deficits in the winter of 2007/2008 being particularly severe. reflecting the fact that electricity is the only form of reliable energy available and the Government’s below-cost pricing policies have encouraged a shift to electricity away from other forms of energy.600 million tons) energy resources.5 ton of oil equivalent. partly due to the legacy of supplying energy without meters and partly due to the lack of commercial orientation within the utilities. average electricity tariffs were considerably below cost-recovery levels. In addition. 7. with the main user groups being industry (51%).

13. and district heat. the Ministry of Economic Development and Trade regulates the prices of electricity. the weighted average tariff is $0. It serves a customer base of approximately 1 million people and employed 11. Electricity infrastructure is in poor technical condition.2 companies.0017/kWh. natural gas. while the company itself is in poor financial condition following years of below-cost tariffs. natural gas. Tariff categories have been reduced to six (albeit with further subgroups) and favorable tariffs for low-usage customers and special summer and winter tariffs for TALCO have been eliminated. and 4 supporting companies (such enterprise as Energosnab and Repair-Mechanical Plant). Instead. Winter supply deficit continues to be a problem. . with the Government holding both tariff setting and ownership functions. The infrastructure needs to be expanded to cater for increased demand and outdated equipment needs to be replaced. 9. further tariff rationalization and increases are required in order to eliminate cross subsidies and fully cover Barki Tajik costs. The state-owned Barki Tajik is in need of major restructuring. Barki Tajik needs to be reorganized to reflect the commercial nature of its business. and Barki Tajik. 12. The Ministry of Economic Development and Trade regulates the prices of electricity. This institutional framework does not reflect the needs of a market-oriented economy.025/kWh (in 2008 terms) in 2010. B. The weighed average tariff is forecast to be $0. and Uzbekistan. Its organizational structure does not reflect modern utility practice. A sector and subsector analysis is in Appendix 2. and poor collection rates. with the result of improved supply during the coldest winter months. 11. Analysis of Key Problems and Opportunities 1. However. have agreed on an approach to tariff rationalization and increase. high losses. The Ministry of Energy and Industry is responsible for coordinating the Government's energy policy. Nevertheless. Turkmenistan. This arrangement is not in line with industry best practice. The Ministry of Economic Development and Trade. The practice of the Government holding both tariff setting and ownership functions is not in line with industry best practice.200 staff in 2007. Barki Tajik is implementing improved rationing procedures whereby load shedding commences earlier in the season. 14. The Committee on State Property exercises ownership functions over state-owned assets. while the Fuel and Energy Department in the Office of the President has overall responsibility for the energy sector. a three times increase of the average tariff from 2006. Following the most recent increase in July 2008. The Ministry of Environmental Protection is responsible for environmental regulation of energy operations. Tajikistan has not appointed an independent energy regulator. Key Power Sector Issues 10. solution of the winter deficit problem will require new HEPPs with seasonal water storage capacity and/or additional thermal generation capacity. 17 subsidiary distribution companies. and district heat. The Project will address part of this need with the reconstruction of one of the most outdated and critical components of the system. despite import of electricity from the Kyrgyz Republic.

including some partly completed hydropower resources and power deficit markets in neighboring countries. This strategy is to be achieved through (i) improvements in the sector’s institutional structure. as follows: (i) The first track focuses on meeting the demand of the domestic market. 4. Project Rationale 18. Asian Development Bank Strategy (ii) 3. Turkmenistan. and comprises a set of policy and investment measures aimed to bring the sector to reasonable operating conditions and improve its financial viability. 2 Reliable operation of Nurek HEPP is critical to meet Tajikistan electric supply requirements and is an important aspect of Central Asian Power System operation. and (ii) support in the development of regional energy trade projects. operational efficiency. and (c) increasing energy supply to meet winter demand. This is consistent with ADB’s Long-term Strategic Framework 2008–2020 (Strategy 2020) 1 where support of infrastructure development and regional cooperation are core areas. The Asian Development Bank (ADB) strategy for the energy sector in Tajikistan is to ensure that domestic energy demands are met from a sustainable and viable industry and to assist in the development of country’s considerable hydropower export potential. Kyrgyz Republic. and pave the way for private sector participation in the sector. Government Strategy 16. with focus on rehabilitation of existing assets.3 15. and Uzbekistan. The second track focuses on increasing electricity exports by (a) using existing seasonal surpluses in the summer. including a heat supply strategy. (b) demand-side management. In 2005. (b) a social protection policy for energy services to improve the effectiveness of the scheme and ensure a more targeted approach to support the poor. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank 2008–2020. the Government developed a strategy based on a two-track approach for the domestic and export markets. 1 2 ADB. 2. enable electricity trade. Central Asian power system includes the networks of Kazakhstan. and financial performance. The policy measures include (a) the implementation of a medium-term tariff policy. the country is not optimally exploiting its export potential. The Project is not included in the current country partnership strategy for Tajikistan but has been added in ADB’s 2008 country assistance program following the Government’s request on 16 July 2008. Nurek HEPP produces over 70% of Tajikistan's electricity and performs a frequency regulation role for the Central Asian power system. 2008. The investment measures include implementation of programs for (a) increased energy efficiency. and (b) attracting private sector investors to join in developing newer hydroelectric and thermal capacities for exports to neighboring and regional countries. Manila. . 17. and (c) an institutional reform policy for the energy sector to improve the transparency and efficiency of operations. Despite having abundant electricity generation potential.

The existing switchyards use obsolete Soviet technology for which replacement parts are no longer available. . with the ground conditions of the proposed new site having been verified as satisfactory by geological investigation. The equipment in both switchyards has exceeded its useful life and is in need of complete replacement. is consistent with this strategy. unstable geological site conditions. Both switchyards currently use air-insulated switchgear (AIS) and are in separate locations within the Nurek HEPP complex. and the potential for loss of major portions of Nurek HEPP output for lengthy periods. This is due to an extensive salt dome in the vicinity of the switchyards that destabilizes the ground conditions during times of snow melt and rain. which will enable continued electricity supply to Tajikistan. On 16 July 2008. The first track of the Government’s strategy—to focus on the domestic market—is being supported by the multilateral and bilateral donor community through a range of rehabilitation projects (Appendix 3). requiring major ongoing remedial measures. In the absence of equipment replacement. making the location yet more unattractive for an electrical installation. 22. the availability of both switchyards will deteriorate in the coming years. 23. which uses approximately 10% of the area required by AIS technology. Severe subsidence in areas of the 500 kV and 220 kV switchyards has been occurring for many years. A 2006 feasibility study conducted by consulting engineers Fichtner of Germany recommended that the equipment in both switchyards be retired with new switchyards to be built on secure ground.200 GWh within an average hydrological year. the capital of Tajikistan. Six generator and turbine units are connected to the Nurek 500 kV switchyard and three to the Nurek 220 kV switchyard. The study examined various alternative sites for the new switchyards. Gas-insulated switchgear (GIS) technology. The Government signed a loan agreement with the German Development Cooperation through Kreditanstalt für Wiederaufbau (Credit Institute for Reconstruction) in August 2008 for the financing of the new 220 kV GIS switchyard with a projected completion date of April 2011. There are also regular landslides in the immediate vicinity of the 500 kV site. 5. the Government requested ADB’s financial assistance to implement the Project. The proposed Nurek 500 kV Switchyard Reconstruction Project. The Project under ADB financing will complete the required rehabilitation of the switchyards. There are risks for both switchyards that a catastrophic event may occur at any time. 24. thereby destroying major parts of the switchgear.4 19. 20. 21. was commissioned in 1972 and produces 11. Such alternatives were limited due to the mountainous location and the salt dome footprint. Nurek HEPP. The study concluded that the least-cost option was to utilize a portion of the existing 220 kV switchyard for both new switchyards. is required due to the restricted area of the proposed new site. thereby curtailing Nurek HEPP output.000 MW. Nurek has nine generator and turbine units with total installed capacity of 3. Ground stabilization measures are considered impractical. situated 75 kilometers east of Dushanbe. External Assistance 25. The Government considers the reconstruction of the 220 kV and 500 kV switchyards to be emergency projects due to the deteriorating equipment.

31. Sangtuda1 HEPP (670 MW capacity). will examine the viability of commercial coal mine developments. . and commercial awareness. This major project would serve the dual purposes of meeting Tajikistan's winter demand and allowing Tajikistan to export the considerable surplus energy. However. The project design addresses this issue by requiring the Government to use the subsidiary loan repayments to subsidize targeted customers while ensuring that Barki Tajik raises its tariff to a full cost-recovery level. 6. Reform is proving to be a slow process. Previous loan covenants requiring the introducing of cost-recovery tariffs have not been fully implemented due to resistance from poor and vulnerable customers who have difficulty in paying the existing low tariffs. A United States Trade and Development Agency-funded study. for which a thermal power plant would be a potential customer. with full capacity operation scheduled for 2009.337. 2006. approved on 28 November).000. 29. 2006. ADB. Report and Recommendation of the President to the Board of Directors on Proposed Loans. the proposed project management unit (PMU) has learned from its experiences and its implementation of ongoing ADB-assisted projects is satisfactory. Manila (TA 4908-TAJ. and Administration of Loans to the Islamic Republic of Afghanistan and the Republic of Tajikistan for Regional Power Transmission Interconnection Project. three of which will be financed by the Russian Federation (the largest with a capacity of 250 MW) and one by the People’s Republic of China (with a 200 MW capacity). Technical Assistance for Preparing the Central Asia–South Asia Regional Electricity Market Project. and in implementing the options. the Government has now indicated its intention to proceed with the delayed restructuring of Barki Tajik.5 26. 70% owned by RAO UES of Russia and 30% by the Government. Manila (Loans 2303-TAJ[SF] and 2304AFG[SF]. and (ii) the ongoing development of the Central Asia–South Asia regional electricity market 5 (CASAREM) project. Delays were experienced in the implementation of early ADB projects due to project staff being unfamiliar with ADB procurement procedures and inexperienced with international projects. with the Government and Barki Tajik being generally resistant to change. Manila (TA 6383-REG. construction of which started during the Soviet era but has since been suspended. approved on 28 November). is under construction. A World Bank-funded feasibility study is due to commence in late 2008. for $56. However. financial controls. ADB. Barki Tajik is weak in nontechnical areas of governance.000.500. Technical Assistance to the Republic of Tajikistan for Strengthening Corporate Management of Barki Tajik. 32.000. approved on 19 December). both of which are energy deficient. 28. Lessons 30. Tajikistan continues to promote the development of Rogun HEPP (3. human resource management.600 MW capacity). for $1. 27. 3 4 5 ADB. for $3. the governments of the People’s Republic of China and the Russian Federation signed agreements with the Government of Tajikistan to finance four new HEPPs. due to commence at the end of 2008. 2006. Technical Assistance Grants. Following the Shanghai Cooperation Organization Meeting in Tajikistan in August 2008. which envisages the building of a high voltage transmission interconnection to allow electricity exports from the Kyrgyz Republic and Tajikistan to Afghanistan and Pakistan. ADB-funded technical assistance (TA) 3 is assisting the Ministry of Energy and Industry in preparing options for the restructuring of Barki Tajik.500. The second track of the Government’s strategy—to focus on the export market—is being implemented with (i) the signing of ADB loans 4 for construction of the Afghanistan–Tajikistan transmission interconnection. with TA completion due in 2010.

ADB experience is that Central Asian countries are still in a transition stage. The Project output is the building of a new Nurek 500 kV switchyard on a new site within the Nurek Hydroelectric Power Plant (HEPP) complex. and provide adequate return on equity investments.9 million (Table 1). The existing 500 kV equipment will be dismantled and will mostly be used as spare parts for other 500 kV substations. As Barki Tajik will perform as a commercial company. In accordance with the Government’s strategy. The Government will then lend the Government’s share and ADB’s share of the Project funds to Barki Tajik through a subsidiary loan agreement acceptable to ADB. A detailed project investment plan by cost category is in Appendix 4. . The impact of the Project is sustainable and reliable electricity supply to support economic development. C. with commercial arrangements between governments often being dictated more by political than economic considerations. The investment cost of the Project is estimated at $66. In the event that the Government identifies a particular consumer class that requires a subsidy. which will replace the existing Nurek 500 kilovolt (kV) switchyard. Special Features 36. 38. Outputs 35. D. this should be funded directly by the Government in a transparent manner. B. This is inconsistent with international best utility practice whereby tariffs should cover costs without cross subsidies. Old metals will be sold to local recycling companies. It will mitigate the risk of natural disasters disabling the switchyard. ADB will provide the project funds to the Government through a grant agreement.6 33. III. and will stabilize the flow of electricity coming from the strategically important Nurek HEPP. which only requires approximately 10% of the area required by AIS technology used in the existing switchyards. Current Barki Tajik tariff methodology employs rates that are below the long-run marginal cost and incorporates cross subsidies between different consumer categories. ADB design of regional trade projects have reflected this stage of development by requiring the trading parties to finalize commercial agreements as a precondition before release of development funds. The outcome of the Project is the reliable evacuation of Nurek HEPP electricity to the grid. 37. Impact and Outcome THE PROPOSED PROJECT 34. repay debt. A. Barki Tajik repayments to the Government of the principal and interest arising from this subsidiary loan agreement will be used exclusively to subsidize the poor and vulnerable electricity consumers in accordance with a methodology agreed with ADB and reflected in such subsidiary loan agreement. Barki Tajik’s tariffs are to be increased such that Barki Tajik’s future income will be sufficient to cover costs. The new Nurek 500 kV switchyard will utilize GIS technology. it should therefore not in itself be the recipient of the ADB grant. Investment Plan 39.

The PMU has been performing satisfactorily in the implementation of ongoing ADB-assisted projects. Base Cost B. Barki Tajik shall employ the services of the PMU for day-to-day management of the Project. The Government has requested a grant of $54.78 5. which may take the form of exemption. Tajikistan is classified as a country with high risk of debt distress and therefore is eligible to receive its Asian Development Fund allocation on a 100% grant basis.1 100. ADB’s Policy on Revising the Framework for Asian Development Fund Grants 6 was approved by the Board on 26 September 2007. The Government and Barki Tajik will provide counterpart funding of $12. Table 2: Tentative Financing Plan ($ million) Source Amount Asian Development Bank 54. the percentage of ADB financing on a grant basis in the country will be based on such country’s debt distress classification. 6 ADB.9 18.90 Source: Asian Development Bank estimates. F. and also for project support and interest. .0 41. Project Management 43.13 Total 66.77 million from ADB’s Special Funds resources to help finance the Project.86 2. Manila. the Government has created a state body to act as an independent PMU to coordinate and implement power projects that are funded through loans and grants from bilateral donors and international financing institutions. Financing Plan 40.7 Table 1: Tentative Project Investment Plan ($ million) Item A. The paper provided that. Contingencies C. Implementation Arrangements 1. Revising the Framework for Asian Development Fund Grants. Interest and repayment proceeds from Barki Tajik to the Government will be used to subsidize tariffs for the poor.77 Government and Barki Tajik 12. Estimated Amount 58. It has been agreed with the Government that it will lend the ADB grant proceeds to Barki Tajik at an interest rate of 5% per annum at a tenor of 25 years including a 5-year grace period and with the foreign exchange risk bourne by Barki Tajik. Share (%) 81.90 E. for countries eligible for grant assistance. Financing Charges During Implementation Total Source: Asian Development Bank estimates.1 million for taxes and duties. Barki Tajik shall be the Executing Agency (EA). 42. 2007. As approved by the resolution number 283 dated July 2006.26 66.

directly or through its agents. and transparency. 5. Advance Contracting 45. 3. The provisions of consulting services are summarized in the indicative procurement plan in Appendix 6. financial. of which the turnkey contract duration will be approximately 3 years. suppliers. 4. A total of 85 person-months of inputs. To expedite project implementation. The outline terms of reference for consultants are in Appendix 11. Modified quality. as amended from time to time). Anticorruption Policy 48. collusive. 6. Procurement 46. mostly by international consultants. prior to signing of the grant agreement. The consultant will be selected and engaged by Barki Tajik in accordance with ADB’s Guidelines on the Use of Consultants. as amended to date) was explained to and discussed with the Government and Barki Tajik. relevant provisions of ADB’s Anticorruption Policy are included in the grant regulations and the bidding documents for the Project. since the consequences of poor performance could be high. Consulting Services 47. The implementation consultant will prepare a detailed implementation schedule during the preconstruction phase of the Project and submit it to the EA and ADB. fraudulent. including the 1-year guarantee period between the taking over and the completion of the warranty period. and other service providers as they relate to the Project. The Government was informed that such advance contracting (including advertising) must comply with ADB’s Procurement Guidelines (2007. in principle. To support these efforts. all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of Barki Tajik and all contractors. ADB reserves the right to investigate.8 2. approved advance contracting for eligible consulting services. . accountability. any alleged corrupt. Consistent with its commitment to good governance. ADB’s Anticorruption Policy (1998. covering the next 18 months of procurement activity. The Project will be implemented over a 5-year period commencing in February 2009. Advance contracting allows the Government to commence procurement activities. ADB Management has. leading to catastrophic economic. The Government and Barki Tajik have been informed that approval of advance contracting does not commit ADB to finance the Project. and social losses. The implementation schedule is in Appendix 5. An indicative procurement plan is presented in Appendix 6.and cost-based selection method with weighting of 90:10 will be adopted. or coercive practices relating to the Project. at its own risk. Implementation Period 44. but does not allow for the award of contract until after the grant has become effective. The procurement plan will be updated at least annually. One turnkey contract for the entire Project will be procured by Barki Tajik using international competitive bidding in accordance with ADB’s Procurement Guidelines. will be required over the consulting service duration of approximately 3 years. One consulting firm will be recruited as the implementation consultant. as amended from time to time) and Guidelines on the Use of Consultants (2007. In particular. consultants.

External auditors for the Project will be recruited in accordance with ADB’s Guidelines on the Use of Consultants. Barki Tajik will maintain separate project records and accounts adequate to identify the goods and services financed from the grant funds. financing resources received. and benefit monitoring in accordance with procedures and details acceptable to ADB. Project Performance Monitoring and Evaluation 53. consisting of project expenditures during the period. as amended from time to time). Barki Tajik’s financial statements shall be audited annually in accordance with International Standards of Auditing by an external auditor acceptable to ADB. and use of local funds. Disbursement Arrangements 50. These project accounts and financial statements will be audited annually in accordance with sound auditing standards by an independent auditor acceptable to ADB. Grant funds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2007. total expenditure to date. 9. expenditures incurred for the Project.9 49. ADB. 7 Where for any particular disclosure the prevailing accounting standard in Tajikistan differs from the International Financial Reporting Standards. The progress reports will also include a summary financial account for the Project. the financial statements shall. Barki Tajik will establish a website that will present information on all externally funded projects. Accounting. in a note to the accounts. Barki Tajik will submit to ADB its audited annual reports in English within 6 months of the end of each fiscal year. 7 Its financial statements shall comprise its balance sheet. 8. and the Barki Tajik board in the next quarter. . and cash flow statement accompanied by their respective schedules and notes to accounts as may be necessary. income statement. Barki Tajik shall maintain its financial statements in double-entry accrual accounting in accordance with the International Financial Reporting Standards (IFRS) followed in Tajikistan. and (iv) work to be carried out in the next period. The progress reports should also have a list of critical decisions required from Government. explain the divergence. Barki Tajik will submit to ADB the audited project annual reports in English within 6 months of the close of every fiscal year. Performance will be evaluated on the basis of indicators and targets stipulated in the design and monitoring framework. if any). 52. using direct payment procedures for the turnkey contract and consulting services. and Reporting 51. including the environmental management plan and resettlement plan. Most importantly. Auditing. (iii) problems or difficulties encountered. Barki Tajik’s external auditor's report will contain the auditor's opinion on whether ADB’s grant funds were used for the purposes specified in ADB’s grant and project agreements. (ii) changes in the implementation schedule. The quarterly progress reports prepared by Barki Tajik will include (i) a narrative description of progress made during the period (progress on compliance with environmental and social requirements. 7. The Barki Tajik annual financial statement shall be accompanied by the auditor's letter to Barki Tajik management and management’s response to it.

administrative. The financial management assessment questionnaire was used to review current practice. The overall staff of the utility totals 11. Although it is fully owned by the Government. accounting. In March 2006. of which about 290 work in the head office in Dushanbe. The review identified issues and constraints and made recommendations to improve budgeting. ADB will field an inception mission after the grant effectiveness. organizational. it was administratively a Government entity. With assistance of ADB TA (footnote 3).480 people. Executing Agency 1. social. internal controls. the Executing Agency. such as the power supply contract with TALCO (the largest industrial consumer with 40% of total consumption). 56. Barki Tajik became a state joint stock holding company. Barki Tajik is managed by a chair and a board of directors appointed by the Government. and a formal separation of operations has taken place along its business lines. Further. The midterm review will focus on institutional. economic. G. Corporate Overview 55. In 2000. Barki Tajik. will undertake an in-depth midterm review of the Project 2 years after grant effectiveness to assess whether the Project outcome and outputs are likely to be achieved. accounting. Project Review 54. environmental. Barki Tajik enjoys autonomous status according to its charter. and sales) report directly to the Barki Tajik chair. Financial Management 57. As agreed with donors. or the financing of new investment projects. Barki Tajik was merged with the Ministry of Energy and Industry. this merger was revoked and Barki Tajik separated from the Ministry of Energy and Industry. Barki Tajik is still receiving subsidies from the Government due to no tariff increases for the past few years. Financial management assessment has been carried out to evaluate Barki Tajik’s ability to fulfill ADB’s fiduciary requirements. audit.10 10. Ten general services departments (among them planning. Financial management of Barki Tajik was found to be adequate. is the state-owned utility responsible for generation. In 1992. 2. the Government approved a 4-year plan of increasing tariffs where Barki Tajik should be able to achieve full cost-recovery by 2010. transmission. In 2004. and legislative compliance to ensure that Barki Tajik’s funds are efficiently and effectively utilized. financial. together with the Government and Barki Tajik. . who also manages issues of great importance. and other aspects that may have an impact on the performance of the Project and its continuing viability. ADB. Barki Tajik is in transition and the assessment was designed to determine its potential to achieve financial and operational independence. Barki Tajik was incorporated as a commercial entity. Prior to the country’s independence. technical. 58. tariff increases thereafter are needed for Barki Tajik to be able to self-finance its investment plan. and regular annual review missions to discuss the latest progress and address current and emerging problems by developing mitigating measures. and distribution of electricity in Tajikistan.

Cost recovery is assumed. As sales in terms of kWh have been consistent for this period (annually around 13.85 million) in 2007.000 GWh for 2009). the projections assume a 2. The consolidated income statement reveals sales revenue growth during the last few years. In order to sufficiently cover such capital expenditure and its daily operations. The results show that total revenues are expected to increase from $203 million in 2009 to $2. average tariffs to consumers are projected to increase from $0. Barki Tajik should be more persistent in resolving the issue of the long-term debt of TALCO through finding efficient means to stimulate the company to respect past agreements and to start repaying debts. The projections have assumed Barki Tajik will purchase hydropower from the IPPs for $0. the increase in revenues can be attributed to improved collection and customer management. In addition. starting in 2009. Barki Tajik is estimated to undergo approximately $1 billion rehabilitation and new capital expenditure program over the next 10–15 years. Accounts receivable remain a major problem. A specific approach to TALCO and irrigation pumping has to be developed with the help of the Ministry of Melioration and Water Economy in order to improve the payment discipline of the customers.47 million) in 2003 to TJS379 million ($110. 62. Cash available over debt service is also projected to be greater than debt payments for the span of the projections. Secondly. the revenue increase from 2006 to 2007 (35%) can be attributed to the increase in tariffs (TJS0. Moreover.080/kWh in 2033. two other factors can be attributed to this increase.023 million in 2033. Barki Tajik is currently able to generate 17. with tariff increases approved to 2010 ($0.11 3.030/kWh in 2014 and $0. Past Financial Performance 59. tariffs will be further increased to $0.035/kWh escalated at 5% per annum.0016/kWh for residential consumers).070/kWh with the same escalation factor. First. The projections have been designed so that Barki Tajik will be a self-sustainable entity without any support from the Government. and Barki Tajik is projected to make a reasonable profit annually (with an average 15% profit margin). including power purchases from the IPPs. Financial Projections 61.5% increase in demand starting in 2012.0182/kWh in 2009 and $0. and thermal (starting in 2016) power for $0.3% per annum. In order for the assumed investment program to be sustainable. despite efforts to improve collections in the past few years. 4. Collection rates improved from 83% in 2003 to 94% in 2006 (2007 figures are not available). it is projected that there will be a gradual improvement in Barki Tajik’s financial performance and position during the planning period from 2009 to 2033. The largest debtors in 2006 were TALCO (TJS81 million) and the Ministry of Melioration and Water Economy (TJS41 million).493 GWh using its own resources and is not able to supply total domestic demand (assumed at 19. With collections improving to 90% in 2016 from the current 80%. 60.040/kWh in 2016. as tariffs were constant from 2003 to 2006 (TJS0.018/kWh in 2009 to $0.0024/kWh in 2007). International financial institution covenants have continued to pressure Barki Tajik to improve (and/or write off) accounts receivable from TALCO and other debtors. . Total revenues increased from TJS217 million ($63. The deficit and future increase in demand will be covered by hydropower and thermal independent power producers (IPPs) coming on line.500 GWh).025/kWh in 2010). an average increase of 7.

(ii) 66.000 per annum due to the increased difficulties of prevention measures year after year.000 in 2009. The major benefits are identified as follows: (i) Less outages and better reliability. Thus. the secured revenue from future energy generation may be attributed to the Project.and without-project scenarios have been modeled to compare the overall net benefits of the Project. capital investment.12 IV. Although geological events are an issue with the existing switchyard (both landslide and subsidence of the existing switchyard site). ASSUMPTIONS. and an integrated component of providing Tajikistan’s major source of generation using least-cost planning principles. AND RISKS Financial and Economic Benefits 63. Nonquantifiable benefits such as geological incidents were not included in the financial evaluation. If the switchyard is not reconstructed. For both the financial and economic analyses. subsidence prevention costs have been included initially at $30. whereas the withoutproject scenario foresees a deterioration of the assets leading to increasing operational costs and constraints in transmitting the generated electricity to the transmission line. The incremental benefits arise from the availability of power through the transmission system due to the improved substation. and taxes—reflect the costs of delivering the estimated benefits. Elimination of geological avoidance and related costs.54%.3% compares favorably with the estimated weighted average cost of capital of 2. The Project’s financial internal rate of return of 9. Cost streams used to determine the financial internal rate of return—i.and without-project investment scenarios. The wheeling charges were computed from the current approved tariffs and have been used on an annually fixed basis to estimate the revenue. and result in a loss of revenue from energy sales. operation and maintenance. 2005. for the without-project scenario. 8 All financial costs and benefits were expressed at constant 2008 prices. It is a part of Tajikistan’s integrated generation and transmission expansion plan. the investment scenario does not include this cost as there is no subsidence. Financial analysis of the Project was carried out in accordance with ADB guidelines. . The Project is least cost. PROJECT BENEFITS. The Project will stabilize transmission of the majority of Tajikistan’s electricity generation to the population. As the Project will be moved to a different location. A. However. due to the unpredictability of geological events no analysis has been done with regard to a hypothetical landslide and subsidence. Financial viability was gauged by comparing the incremental costs and benefits of with. The relocation and/or reconstruction of the switchyards does not lead to increased energy generation. the Project secures the future flow of revenue to Barki Tajik. disrupt the energy supply from Nurek HEPP. 64. insurance costs. the existing switchyard will gradually break down. Cost–benefit 8 ADB. Financial Benefits. Economic Benefits. IMPACTS. indicating financial viability of the Project.e. However. Financial Management and Analysis of Projects. with. The economic analysis was based on a time-slice approach to the Project. Manila. Summary financial analysis is in Appendix 10. 65. while incremental operation and maintenance costs were charged for each year. escalating by a factor of $50. and thus does not generate incremental increase in revenues.

Economic performance was evaluated by comparing with. which has been in operation for over 30 years. and it was judged to be economically viable. benefits. The Project will ensure stable and reliable supply of power that will contribute to the development of the national economy. An initial environmental examination (IEE) report was prepared in accordance with ADB's Environment Policy (2002) and Environmental Assessment Guidelines (2003). Manila. Environmental Impact 71. Incremental consumption occurs because of the stable availability of adequate and reliable power supplies. All costs. The Project is categorized as category C both in terms of involuntary resettlement and indigenous peoples impact. These items will be monitored by the PMU and will be reported to ADB through periodical progress reports. 2006. Manila.and without-project scenarios. without the Project. 2003. The main benefit stems from the incremental energy provided to the population assuming that. B. The economic internal rate of return was estimated at 36. 69. Core Labor Standards Handbook. 10 The IEE confirmed that only minor impacts are expected during the construction phase of the Project. and revenues are expressed in 2009 constant prices. The analysis period includes the construction and operation period equal to 40 years. Economic benefits accrue to consumers and the economy as a result of the Project. Barki Tajik has been granted the land-use rights. The construction works involve disposal of spoil.13 projections were prepared and analyzed by the Project. All construction works of the new switchyard and dismantling of the old switchyard takes place within the fenced compound of the Nurek HEPP. A summary of the economic analysis is provided in Appendix 7. the Project is expected to result in indirect benefits to the majority of the population of Tajikistan. The Project will result in approximately 50 new skilled and unskilled temporary jobs being created for construction. The Project is not expected to deliver direct benefits to the poor since the Project is the reconstruction of an existing switchyard that evacuates generated power of Nurek HEPP to the national grid. 70. . The summary poverty reduction and social strategy is presented in Appendix 8. The Project does not entail land acquisition and resettlement (LAR) and does not involve indigenous peoples.7% based on the incremental cost–benefit streams associated with the Project. Environmental Assessment Guidelines. Adherence to ADB's core labor standards 9 and the Labor Law (1997) of Tajikistan will be included in the Grant Agreement and the bidding documents for the turnkey contract. the switchyard would have to continuously be off line for repair and subsidence prevention works. 67. Social and Poverty Impacts 68. and the area has been used until very recently as a spoil bank to deposit dredged materials from downstream 9 10 ADB. Requirement for education on HIV/AIDS and prohibition of child labor will also be indicated in the Grant Agreement and the bidding documents. based on willingness to pay. The Project is categorized as category B in terms of environmental impact. including the poor. The economic internal rate of return compares the annual streams of economic capital and operating costs against the benefits. Given that Nurek HEPP is responsible for over 70% of the electricity generated in Tajikistan. C. ADB. The spoil bank is located just outside the Nurek HEPP compound in an area which was once the borrow area for excavating materials for the construction of the dam body.

which are expected following consultant interaction with potential bidders during the feasibility study stage. It is also assumed that the Government is committed to making available the necessary investments to rehabilitate and develop the electricity sector. At an institutional level. The ongoing ADB technical assistance (footnote 3) is supporting these reforms in this regard. Rehabilitation of the nine turbine and generators of Nurek HEPP is not included in the Project but will need to be carried out in the medium term. the Government is seeking funds in the amount of $300 million to rehabilitate the nine turbine and generators. The IEE will be updated by the turnkey contractor once the detailed design is completed. implementing the Project. and aluminum) will be sold to local recycling companies. parallel implementation of a related 220 kV switchyard project. The summary IEE is presented in Supplementary Appendix F. (ii) (iii) (iv) (v) (vi) (vii) 74. 76. . and (ii) deliver on its assurances to improve collection levels and adequately fund operation and maintenance. and implementation risk of the 500 kV project being minimized. Meanwhile. However. with the proposed selection of a turnkey contractor who will have single overall responsibility. it is assumed that Barki Tajik will (i) implement needed reform with the modernization of its governance and corporate procedures. which is on schedule with signing of loan agreement and selection of implementation consultant having been completed. as has been recent practice. 72. Project Risks and Assumptions 73. copper. the existing PMU. the implementation consultant being selected using a technical-financial weighting of 90:10. The Nurek dam structure is in good condition and is not in need of rehabilitation. and old metals (steel. D. Most of the parts and materials generated from dismantling of the existing switchyard will be used as spares in other 500 kV substations. The project facilitates such a policy through the requirement that repayments by Barki Tajik to the Government of the subsidiary loan will be used exclusively to support poor and vulnerable electricity consumers. the overall technical risk is deemed to be low based on (i) the probability of repeat of poor ground conditions at the new site location being remote.14 of the Nurek HEPP. bidder qualification criteria that will ensure that only competent and proven contractors are eligible to bid. it is assumed that the Government will implement full cost-recovery tariffs. The IEE report contains an environmental management and monitoring plan and an indicative budget for the purchasing of monitoring devices. The Project is technically complicated given its advanced technology content and the need for the two new switchyards to be integrated both with each other and with the existing power station. It is assumed that total failure of Nurek HEPP will not occur as the nine units operate independently of each other and any one unit can be repaired and rehabilitated at the time of failure. 75. which has experience on similar donor-funded projects. No civil works will be permitted to commence until the updated IEE is approved by ADB. thereby putting a high emphasis on quality. technically and economically viable bids. At a policy level. as a detailed geological survey confirming the suitability of the new site was carried out during the feasibility study stage.

Specific Assurances ASSURANCES AND CONDITIONS 77. in addition to the standard assurances. KfW Component 82. 4. and ADB. the evaluation of bids. 81. The Government and Barki Tajik provided the following assurances. a procurement specialist. and the supervision of the installation of the project facilities. 3. The Government shall ensure that repayments of principal and interest by Barki Tajik to the Government arising from the Subsidiary Loan Agreement between Barki Tajik and the Government are used exclusively for tariff subsidies for poor and vulnerable electricity consumers in accordance with a methodology satisfactory to ADB. at all times throughout the implementation of the Project. (ii) the tariff is adopted in 2011 and thereafter fully covers the operating cost. The PMU shall appoint a dedicated full-time team responsible for the administration of the Project. that the KfWfinanced Nurek 220 kV rehabilitation project is commissioned by no later than June 2011. Tariff Adjustments 83. This shall include the processing of bidding documents. project accountants. 80. and shall cause Barki Tajik to ensure. contractors. The Government shall ensure. and (iii) public awareness programs are conducted to educate the public on the need for a rational electricity tariff scheme and the importance of energy conservation. The Government shall ensure that Barki Tajik maintains responsibility for the Project and employs the services of the PMU in regards to day to day management of the Project. The Government shall ensure that. which will be incorporated in the legal documents: 1. The specific methodology shall be agreed with ADB and duly reflected in the subsidiary Loan Agreement. . and other experts on demand. The team shall be staffed with suitably qualified personnel to include a project director. 79.15 V. a project finance specialist. A. 2. Use of Principal and Interest Repayments 84. as well as the necessary liaison among Barki Tajik. The Government shall ensure that the tender evaluation committee for all tenders related to the Project shall include at least two Barki Tajik employees of which one shall be the chair of the committee. the PMU project team remains adequately staffed and assisted by the consultants engaged under the Project. The Government shall take all necessary measures to ensure that (i) tariffs are adequately adjusted throughout the project implementation period to enable Barki Tajik to take into account the service costs including inflation and to comply with financial covenants. Project Implementation Unit 78.

6. The Government shall ensure that no material changes (either financial. The Government shall cause Barki Tajik to establish. The Government shall ensure that Barki Tajik has adequate legal powers and enforcement mechanisms to effectively collect service fees and penalize defaulters in order to . 92. Financial Management The Government shall cause Barki Tajik to comply with the following requirements: 89. if such changes would or are likely to affect the ability of Barki Tajik to perform its obligations under the Project Agreement and Subsidiary Loan Agreement. the list of goods and/or services purchased. or operational) to. Barki Tajik shall ensure that its accounts receivable (i) from 31 December 2008. Barki Tajik shall maintain an operating ratio (percentage of operating expenses against revenues) of less than 90%. Collection Efficiency 93. With regard to the Project. a website that will present information on all externally funded projects. The financial statements shall be audited annually by an external auditor acceptable to ADB accompanied by the auditor’s letter to Barki Tajik management and management’s response to it. do not exceed the equivalent of the aggregate amount of 6 months of billings at the end of each quarter. including the debt to be incurred. 86. 7. In the event that Barki Tajik or any part thereof is privatized during the term of the grant. The Government shall cause Barki Tajik to provide adequate funds for carrying out such audits.3 times the estimated maximum debt service requirements of Barki Tajik for any succeeding year on all debt of Barki Tajik. nor major asset transfer to and from. The Government shall cause Barki Tajik to have the project and corporate accounts annually audited by an independent auditor acceptable to ADB. 90. Barki Tajik are formally approved or implemented during the term of the Grant. 88. 87.16 5. Except as ADB shall otherwise agree. unless its free cash flows for the 12 months prior to the date of such incurrence shall be at least 1. names of the winning bidders. structural. Barki Tajik will submit to ADB its audited annual reports in English within 6 months of the close of every fiscal year. Barki Tajik shall maintain its financial statements in accordance with the IFRS. Barki Tajik shall not incur any debt. within 1 year of the effective date of the Grant Agreement. Governance and Transparency 85. amounts of the contracts awarded. are maintained at a level that does not exceed the equivalent of the aggregate amount of 3 months of billing. 91. the Government shall consult with ADB in order to review the terms and conditions of this Grant Agreement with a view to making any amendments that may be deemed necessary. and their intended and actual utilization. the website shall provide information on. financial statements of Barki Tajik. and (ii) from 31 December 2009 onwards. From 31 December 2008 onwards. among other things. without prior ADB approval. procurement activities (including the list of participating bidders). basic details on the adopted bidding procedures.

The resettlement plan shall be disclosed to affected people prior to the submission to ADB. In such case. and ADB’s Involuntary Resettlement Policy (1995). The existing social and environment management unit of the PMU is responsible for monitoring the implementation of the mitigation measures identified under the IEE and the summary poverty reduction and social strategy. (v) are required not to differentiate between men and women’s wages or benefits for work of equal value. However. LAR is not envisaged in the Project. or cause Barki Tajik to ensure. that adequate budget is allocated for the safe disposal of the hazardous materials in accordance with relevant laws of Tajikistan as well as international conventions the Government is a signatory to. and all project facilities are designed. Although the Government has issued written confirmation that hazardous materials are not used in the existing equipment scheduled for dismantling. deter nonpayment. prepared for the Project and agreed with ADB. Condition for Grant Effectiveness 99.17 improve the collection efficiency. the Government shall cause Barki Tajik to ensure that all activities under the Project are carried out in full compliance with all applicable laws and regulations. and ensure sustainability of Barki Tajik operations. A Project Agreement between ADB and Barki Tajik shall have been signed and become effective. and (vi) abstain from using child labor. the Government shall immediately inform ADB and shall ensure. (ii) comply with ADB's core labor standards. including the preparation of the land acquisition and resettlement plan in full consultation with affected people. 95. (iii) use their best efforts to employ women and local people negatively affected by. and will inform ADB about the progress of social and environmental monitoring through regular reports. constructed. Tajikistan). ADB’s Environment Policy (2002). 98. the Project. The Government shall cause Barki Tajik to ensure that all contractors (i) comply with all applicable labor laws (Labor Code of 15 May 1997. 8. if any LAR needs are identified during implementation of the Project. B. 9. ADB's Environmental Assessment Guidelines (2003) (footnote 10) and the IEE including the environmental management and monitoring plan. operated. the Government will be responsible for the disposal of such materials if any are identified. Environment and Safety 94. . or living in the vicinity of. Social Safeguard 97. The Government shall cause Barki Tajik to ensure that the Project is carried out. (iv) disseminate information at worksites on the risks of sexually transmitted diseases and HIV/AIDS for those employed during construction. and maintained in compliance with applicable national laws and government regulations concerning environmental protection. The land acquisition and resettlement plan shall be submitted to ADB for review and approval. 96.

with foreign exchange risk being bourne by Barki Tajik and on other terms and conditions acceptable to ADB shall have been signed and become effective. Condition for Disbursement 100.18 C.000 to the Republic of Tajikistan for the Nurek 500 kV Switchyard Reconstruction Project from ADB’s Special Funds resources upon terms and conditions that are substantially in accordance with those set forth in the draft Grant and Project Agreements submitted to the Board herewith. The Subsidiary Loan Agreement between the Government and Barki Tajik for relending of the proceeds of the grant at an interest rate of 5% per annum over a tenor of 25 years including a 5-year grace period. VI. RECOMMENDATION 101.770. I am satisfied that the proposed grant would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve the grant not exceeding the equivalent of $54. Haruhiko Kuroda President 27 October 2008 .

O&M = operation and maintenance.77 million (grant) 2. Completion of warranty period in January 2014 HEPP = hydroelectric power plant.$2.Appendix 1 19 DESIGN AND MONITORING FRAMEWORK Design Summary Impact Sustainable and reliable electricity supply Performance Targets and/or Indicators System load-shedding is eliminated by 2020 Barki Tajik is financially viable by 2011 Quality of electricity supply meets international standards by 2020 Data Sources and/or Reporting Mechanisms Absence of customer complaints and reports in the media Barki Tajik audited annual financial reports per IFRS Barki Tajik annual system failure data Assumptions and Risks Assumptions • Full cost-recovery tariffs are approved • Necessary investments are made to rehabilitate and develop electricity sector Risks • Barki Tajik operations and governance is not modernized • Collection levels are inadequate Assumptions • Nurek HEPP continues to operate • Barki Tajik adequately funds O&M • Government is committed to rehabilitate Nurek HEPP in medium term Risks • 220 kV switchyard is not installed and operational by April 2011 • Failure of Nurek HEPP turbines/generator units Outputs New 500 kV switchyard built at a secure location and connected to the grid and Nurek HEPP Assumption • Receipt of technically and economically viable bids Risk • Implementation of 220 kV switchyard reconstruction project is delayed Outcome Reliable evacuation of Nurek HEPP electricity to the grid Nurek HEPP switchyard is available 99% of the time (excluding planned maintenance) from project completion System failure reports Successful completion of all commissioning tests by 2013 Consultant completion report Project commissioning data Activities with Milestones Inputs 1. IFRS = international financial reporting standards. Engagement of consultant by June 2009 ADB .$9. Procurement of civil works contractor by June 2010 Government . Completion of civil works by January 2013 Barki Tajik .$54.36 million 3. kV = kilovolt. .76 million 4.

the current tariffs have been increased so that they are closer to the financial viability levels. However. Until recently.00 GDP = gross domestic product. Source: International Energy Agency website. 2.46 14. 1. . In the gas sector.93 3. average electricity tariffs were considerably below cost-recovery levels at $0.1: 2005 Energy Data Item Population GDP Energy Production Net Imports of which Petroleum Products 75% and Coal 23% Total Primary Energy Supply Electricity Consumption Total Primary Energy Supply/Population Total Primary Energy Supply/GDP Electricity Consumption/Population Unit million billion (2000. $) mtoe mtoe mtoe TWh toe/capita toe/thousand (2000.53 2.600 million tons) energy resources of which only a small fraction (4.006 per kilowatt-hour (kWh). is responsible for coordinating the Government's energy policy.060 megawatts [MW] of hydroelectric installed capacity and 60. the Fuel and Energy Department in the Office of the President has overall responsibility for the energy sector. Tajikistan possesses vast amounts of hydroelectric (40 gigawatt [GW]) and coal (3.282.24 2. The predominance of hydroelectric-based energy creates a problem for Tajikistan as hydropower production exceeds demand in summer and is reduced in winter when glacial melt is least and demand is most. but there is excess water due to low electricity demand and insufficient water storage facilities. mtoe = million tons of oil equivalent. Per capita domestic energy consumption is high given the country's level of economic development. $) kWh/capita Value 6.54 1. established in October 2000. B.025/kWh (in 2003 terms) by the end of 2010. Sector Overview Table A2. With the rise in prices of imported fuel. households have switched to electricity for heating and cooking. Tajikistan imports electricity and fossil fuels in winter to meet energy needs. with the deficits in the winter of 2007/2008 being particularly severe. 3. This is because of the low end-use efficiency and high heating requirements during winter. As a result. kWh = kilowatt-hour.52 1. In summer electricity is exported. The Ministry of Energy and Industry. toe = tons of oil equivalent. At the policy and regulatory level. Coal prices are market based. TWh = terawatt-hour. 4.50 1.000 tons of coal production per annum) has been exploited. reflecting the fact that electricity is the only form of reliable energy available and that the Government’s historical below-cost pricing policies have encouraged a shift to electricity away from other forms of energy.80 0. Institutional Structure 5.20 Appendix 2 SECTOR AND SUBSECTOR ANALYSIS A. the Government is now committed to bringing the average tariff to a more financially viable level of $0. The country faces energy deficits and cannot meet its winter demand.

leading to a deterioration of the physical infrastructure. C. 10. Tajikangisht. The state coal mining company. and district heat. Barki Tajik. In the natural gas sector. In the heating sector. (ii) the Dushanbe District Heating System Enterprise owned by the municipality. One coal mine (Shurab) has been corporatized as a joint stock company. 6. a joint stock company 100% owned by the state. and losses are shown by year in Table A2. was abolished in 2003 and the Department of Coal in the Ministry of Energy and Industry was given the responsibility to corporatize and privatize the coal mines. transmission. 7. and (iii) the State Unitary Enterprise of Housing and Communal Services. is a vertically integrated utility responsible for generation. Tajikistan’s transmission network consists of three separate grids: (i) one in the north of 220 kilovolt (kV) connecting the sole hydropower plant (Kairaikum. natural gas. Electricity generation. another (Rovnov) has become a joint-venture private company. .895 MW. 240 MW capacity). commercial losses are high. The power sector alone represents up to 5% of gross domestic product and is a critical input for the main exports of cotton and aluminum. 8. Annual hydropower energy output is about 16.2. In addition. and distribution of electricity in Tajikistan. 11.500 megawatt-hours (MWh) over the remaining non-summer months. The Committee on State Property exercises ownership functions over state-owned assets. transmission. which in turn results in high network losses and reduced reliability. no significant investments have been made since the country’s independence in 1991. On average. except in Gorno Badakshan Autonomous Oblast where the privately owned Pamir Energy operates all power facilities under a 25-year concession granted in 2002. and distribution of gas in the country. three institutions are responsible: (i) Barki Tajik. and (iii) one in the west in the Gorno Badakshan region. consumption. (ii) the central grid with an installed generation capacity of 3.Appendix 2 21 The Ministry of Economic Development and Trade regulates the prices of electricity. Despite this. Tajikistan has a summer (May– September) surplus of 1. Tajik Gas was formed as a state unitary enterprise responsible for import. partly due to the legacy of supplying energy without meters and partly due to the lack of commercial orientation within the utilities. Power Sector 9. This committee reports directly to the Office of the President.000 gigawatt-hours (GWh) and electricity is delivered to nearly 100% of the population.500 GWh available for export with an unmet demand of 2. The Ministry of Environmental Protection is responsible for environmental regulation of energy operations. trade.

988 18. Installed power generation capacity. and poor collection rates.3. 12.3: Electricity Composition (%) 2000 2001 2002 2003 43 45 45 48 32 33 31 30 4 3 3 3 21 19 21 19 Item Industry Agriculture Other Sectors Households 2004 49 30 3 18 2005 51 27 3 19 Source: Feasibility Study by SNC Lavalin (ADB. Barki Tajik is in poor financial condition following years of below-cost tariffs. 11 subsidiary distribution companies.224 16. mainly comprises six hydropower plants totaling 4. New large generation projects are being constituted as new joint stock companies (e.247 15. Manila [TA 6383-REG].76 1.353 16.058 16.748 14.130 16.200 staff in 2007. Source: Feasibility Study by SNC Lavalin (ADB.060 MW and two fossil fuel-fired combined heat and power stations totaling 345 MW.56 1. Technical Assistance for Preparing the Central Asia–South Asia Regional Electricity Market Project.527 228 16.737 14.839 119 16.4 1.9 964 16.016 12.171 148 16.302 16. HPP = hydropower plant. 13.086 138 15.389 11. Tajikistan Aluminum Company accounts for approximately 80% of the total industrial demand.901 2003 2.046 12. the vertically integrated power utility.g. Table A2.9 1.958 16.829 11. 2006. 2006.158 2006 3.000.405 15.318 GWh = gigawatt-hour. Sangtuda I joint stock company has been formed for completing the construction of the large run-of-river Sangtuda I hydroelectric project).187 5-Year Average GWh GWh GWh 15.078 16.200 102 16. TPP = thermal power plant. Domestic electricity composition by year is shown in Table A2.333 14.065 2005 3.2: Electricity Supply and Consumption Indicator Peak Demand Domestic Generation HPPs TPPs Total Domestic Generation Exports to Uzbekistan Kyrgyz Republic Turkmenistan Export Total Imports from Uzbekistan Kyrgyz Republic Turkmenistan Import Total Net Supply to Domestic Market Domestic Electricity Sales System Losses GWh % GWh GWh GWh GWh 360 118 580 1. MW = megawatt. It serves a customer base of approximately 1 million people and employed 11. Barki Tajik.523 17. and 8 supporting companies (such as a research institute and a construction company).219 12.494 13.50 GWh GWh GWh GWh 72 163 31 266 933 694 738 873 701 Unit MW 2002 2.027 17. consists of a network of 10 subsidiary power generation companies. 14.991 2004 3.22 Appendix 2 Table A2.755 16. at 4. Nurek is by far the largest hydropower plant and has . Technical Assistance for Preparing the Central Asia–South Asia Regional Electricity Market Project.201 152 16. Manila [TA 6383-REG]. high losses.405 MW. The private Pamir Energy operates the existing 40 MW of generation and transmission and distribution system in the western Gorno Badakshan region serving a population of 200.

Following the Shanghai Cooperation Organization meeting in Tajikistan in August 2009. the governments of the People’s Republic of China and the Russian Federation have signed agreements with the .Appendix 2 23 been in operation since 1972 with an installed capacity of 3. Tajikistan developed a strategy based on a two-track approach for the domestic and export markets. (ii) demand-side management including a heat supply strategy. will examine the viability of commercial coal mine developments for which a thermal power plant would be a potential customer. including some partly completed hydropower resources and some power-hungry electricity markets in neighboring countries. and (iii) increasing energy supply to meet winter demand. is under construction. the country faces energy deficits and cannot meet its winter demand. 70% owned by RAO UES of Russia and 30% by the Government. and pave the way for private sector participation in the sector. Turkmenistan. Winter supply deficit continues to be a problem despite imports of electricity from the Kyrgyz Republic. enable electricity trade. the country is exploiting this potential suboptimally. The first track focuses on the domestic market. the infrastructure is in poor technical condition with the problem compounded by a shift in electricity consumption patterns. Tajikistan. and comprises a set of policy and investment measures aimed to bring the sector to reasonable operating conditions and improve its financial viability. with completion scheduled for 2009. the state-owned enterprise Barki Tajik needs major restructuring. with focus on rehabilitation of existing assets. the institutional framework does not reflect the needs of a market-oriented economy. solution of the winter deficit problem will require new HEPPs with seasonal storage capacity and/or additional thermal generation capacity. and Uzbekistan. The second track focuses on increasing electricity exports by (i) using existing seasonal surpluses in the summer. Barki Tajik is implementing improved rationing procedures whereby load shedding commences earlier in the season resulting in improved supply during the coldest winter months. Problems and Opportunities The main issues faced by the Tajik energy sector are: (i) (ii) (iii) (iv) (v) (vi) despite well-developed infrastructure. 15. 18. E. Kyrgyz Republic. In 2005. the historically low level of electricity pricing impedes necessary resource mobilization. D. and despite having abundant electricity generation potential. and Uzbekistan. and (ii) attracting private sector investors to join in developing newer hydroelectric and thermal capacities for exports to neighboring and regional countries. and lacks commercial orientation. a United States Trade and Development Agency-funded study. 16.000 MW. However. The Sangtuda1 670 MW HEPP. It provides regulation of the Vakhsh River and gives stability to the power system in Kazakhstan. The policy measures include (i) the implementation of a medium-term tariff policy. The investment measures include implementation of programs for (i) increased energy efficiency. Current Power Sector Developments 17. Regarding possible new thermal generation. and (iii) an institutional reform policy for the energy sector to improve the transparency and efficiency of operations. due to commence in 2008. (ii) a social protection policy for energy services to improve the effectiveness of the scheme and ensure a more targeted approach to support the poor.

The proposed Nurek 500 kV Reconstruction Project. three of which will be financed by the Russian Federation (the largest with a capacity of 250 MW). 19. This major project would serve the dual purposes of meeting Tajikistan winter demand and allowing Tajikistan to export the considerable surplus energy. which will enable continued electricity supply to Tajikistan. A World Bank-funded feasibility study is due to commence in 2008. and (ii) the ongoing development of the Central Asia–South Asia Regional Electricity Market Project 1 which envisages the building of a high-voltage transmission interconnection to allow electricity exports from the Kyrgyz Republic and Tajikistan to Afghanistan and Pakistan. with project completion due in 2010.24 Appendix 2 Government of Tajikistan to finance four new HEPPs. The weighed average tariff is forecast to be $0. both of which are energy deficient.600 MW HEPP. 21. construction of which started during the Soviet era but has since been suspended. Tariff categories have been reduced to six (albeit with further subgroups) and favorable tariffs for low-usage customers and special summer and winter tariffs for Tajikistan Aluminum Company have been eliminated. The first track of the Government’s strategy—to focus on the domestic market—is being supported by the multilateral and bilateral donor community through a range of rehabilitation projects (Appendix 3). The second track of the Government’s strategy—to focus on the export market—is being implemented with (i) the signing of loans for the construction of the Afghanistan–Tajikistan transmission interconnection. 2006. 1 ADB. further tariff rationalization and increases are required to eliminate cross subsidies and fully cover Barki Tajik costs. Tajikistan continues to promote the development of the Rogun 3. is consistent with this strategy. . Technical Assistance for Preparing the Central Asia–South Asia Regional Electricity Market Project. with the most recent increase approved in July 2008. Nevertheless. Manila (TA 6383-REG). and one by the People’s Republic of China (with a capacity of 200 MW). and in implementing those options. 20. The Ministry of Economic Development and Trade and Barki Tajik have agreed upon an approach to tariff rationalization and increase. a three times increase of the average tariff from 2007. An ADB-funded technical assistance project (footnote 3) is assisting the Ministry of Energy and Industry in preparing options for the restructuring of Barki Tajik.025/kWh in 2010.

KFAED = Kuwait Fund for Arabic Economic Development. 13 2009 8 Rehabilitation of Dushanbe City Distribution Network Project Energy Loses Reduction Project . 9 2011 18 Construction of Small HPS in Rural Area Nurek Switchyard 220 kV Rehabilitation Project 38 13 Rehabilitation of Varzob HPS-1 2008 Construction of the transmission line 500 kV “South–North” 267 55 2009 500 267 55 500 Construction the transmission line 220 kV “Lolazor–Khatlon” Completion of the Sangtuda-I hydropower plant. 670 MW Total Appendix 3 61 34 16 9 13 18 38 13 322 500 1024 Total Total 57 5 40 13 26 9 38 13 25 ADB = Asian Development Bank. RAO-UES = RAO Unified Energy System.Reduction of the commercial losses in the electricity and gas systems. 2008 34 15 8 2010 5 Emergency Baipaza Landslide Stabilization Project (ADB Loan 1912) Restoration of water flows in the Vakhsh River to at least the pre-earthquake levels. KfW = Kreditanstalt für Wiederaufbau.Table A3: EXTERNAL ASSISTANCE TO THE POWER SECTOR ($ million equivalent) ADB ADB IsDB OFID OFID KfW SECO SECO KFAED World Bank World Bank Indian Govt Indian Govt Completion Date Exim Bank (PRC) Exim Bank (PRC) RAO-UES (private sector) (private sector) Project Title/ Project Description Power Rehabilitation Project (ADB Loan 1817) . PRC = People’s Republic of China. IsDB = Islamic Development Bank. SECO = Swiss State Secretariat for Economic Affairs. HPS = hydropower station. Govt = government. OFID = OPEC Fund for International Development. MW = megawatt.Rehabilitation of power transmission and distribution facilities in the war-damaged areas in Khatlon and Dushanbe regions. . Source: ADB estimates. 2009 22 10 9 Regional Power Transmission Interconnection Project (ADB Loan 2303) Construction of a 220 kilovolt (kV) double-circuit transmission line that will link the power grids in Afghanistan and Tajikistan.

Consultants (Project Management) 4.b 1.12 ADB = Asian Development Bank. Financing Charges During Implementation 1.26 12.50 9. Taxes and Duties Subtotal (A) B.00 4. Mechanical and Equipment 2. d Computed in accordance to ADB Financial Management and Analysis of Projects (2005).86 2.00 38. e Interest during construction has been computed at an all in rate of 5% flat. Physicalc 2.97 9. c Price contingencies are based on domestic and international inflation rates as projected by ADB. Price d Financing ($ million) % of Total Base Cost ADB Gov’t Total Cost 38.11 0.92 100. Project Implementation Costs 5.86 5.36 8. Investment Costsa.92 5. Civil Works 3.91 9.59 0.86 0.36 8.11 0.81 54. Interest During Implementatione Subtotal (C) Total Project Cost (A+B+C) 2.45 2.45 2.38 3.94 2.50 9. a In mid-2008 prices.36 58. Source: ADB estimates.85 15.90 3.26 66.26 2.84 3.26 Appendix 4 PROJECT INVESTMENT PLAN Table A4: Detailed Investment Plan by Cost Category and Financiers $ Million Item A. Contingencies 1.94 2.84 113.26 14.92 5. Gov’t = government.97 2.78 65. b Investment cost includes implementation of the environmental management and monitoring plan.00 Subtotal (B) C.36 48. .77 2.

Submission of Proposals 6. Recruitment of Consultants 1. MRM = Management Review Meeting. Issuance of Bid Documents 8. FTP = full technical proposal. Reference: Implementation Schedule of 220 kV Switchyard Rehabilitation 1. Financial Evaluation 11. 12 2 Year 2008 2010 2011 2012 2013 2014 3 Month 1 Grant Effectiveness Board Approval 9 10 11 12 1 Month No. 60 61 62 63 MRM A. Actual schedule to be finalized by turnkey contractor with approval of Barki Tajik. Award of Contract B. Preparation of Bids 9. FS = feasibility study. Award of Contract C. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 …. Take Over 12. Detailed Design 3. Completion of the Warranty Period Appendix 5 D. Contract Negotiations 9. RFP = request for Source: Asian Development Bank estimates. Custom Clearance and National Transport 7. Shortlisting/Preparation of RFP 3. kV = kilovolt. . Factory Test Turnkey contract schedule is indicative only. Technical Evaluation 10. Review of FS and Site Investigation 3. Turnkey Contract 27 CSRN = consulting services recruitment notice. Continuous Intermittent Milestone Ad (CSRN) 2. Preparation of Draft Bid Documents 6. Trial Operation 12 months guarantee period 11. Comments by BT and Finalization of Bid Document 7. Preparation of Design Report 5. Mobilization of Consultant 2. Financial Evaluation 8. Mobilization of Consultant 2. Design and Procurement 2. Outline Design and Procurement of Turnkey Contract 1. Commissioning 10. Contract Negotiations 12. Erection of Equipment 9. Manufacturing 4. Submission of Inception Report 4. Preparation of Proposals 5. Technical Evaluation 7. Shipment 6. Issuance of RFP (FTP) 4.Table A5: Implementation Schedule 2009 2 1 2 3 4 5 6 7 8 9 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 …. GIS = gas-insulated switchgear. Construction of GIS Building and Cable Ducts 8. 5. Turnkey Contract 1.

Project Procurement Thresholds 1. Process Thresholds.28 Appendix 6 INDICATIVE PROCUREMENT PLAN Project Name: Reconstruction of Nurek 500 kV Switchyard Project Loan Amount: $54 million Date of the First Procurement Plan (loan [grant] approval date): 17 November 2008 Grant Number: 42189 Executing Agency: Barki Tajik Date of this Procurement Plan: 22 August 2008 A.and Cost-Based Selection Prior Comments Turnkey Comments 90:10 3. . Procurement of Goods and Works Procurement Method Prior or Post International Competitive Bidding for Goods Prior Recruitment of Consulting Firms Procurement Method Prior or Post Quality. Goods and Works Contracts Estimated to Cost More Than $1 Million 3. and 18-Month Procurement Plan 1. the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the Project. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. ADB Prior or Post Review 2. General Description Turnkey Contract for Rehabilitation of Nurek Hydropower 500 kV Switchyard Contract Value $50 million Procurement Method International Competitive Bidding Goods (Turnkey) Prequalification of Bidders (yes/no) Yes Advertisement Date (quarter/year) Q2/2010 Comments Decision on use of prequalification will be made by Barki Tajik based on recommendation of the implementation consultants. it will be carried out in compliance with ADB guidelines and procedures. If prequalification is adopted. Except as ADB may otherwise agree. Except as the Asian Development Bank (ADB) may otherwise agree.000 and above 2. Review. the following process thresholds shall apply to procurement of goods and works. Procurement of Goods and Works Method Threshold International Competitive Bidding for Goods $500.

The following table provides an indicative list of all procurement (goods. General Description Implementation Consultants for Reconstruction of Nurek Hydropower 500 kV Switchyard Contract Value $2. C. Contracts financed by the Borrower and others should also be indicated. The implementation risk is mitigated by increasing the emphasis on quality in the selection of the consultant through the use of a 90:10 quality. General 6.Appendix 6 29 4. Project Procurement Plan 1. The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. Indicative List of Packages Required Under the Project 5. General Description Goods Estimated Value (cumulative) $50 million Estimated Number of Contracts 1 Procurement Method Internal Competitive Bidding Quality.and Cost-Based Selection (90:10) Domestic Preference Applicable No Comments N/A Consulting Services $2. National Competitive Bidding .Tajikistan 1. and consulting services) over the life of the Project.and cost-based selection weighting. B. Consulting Services Contracts Estimated to Cost More Than $100. works.000 4. with an appropriate notation in the Comments section. Works and Services effective on 3 March 2006 with the clarifications and modifications described in the following .and Cost-Based Selection (90:10) Advertisement Date (quarter/year) Q1/2009 International or National Assignment Mostly international experts Comments The Project is technically complex due to the need for it to be integrated with the related 220 kV project and the requirement to work in an energized switchyard.5 million 1 FTP N/A international experts. The procedures to be followed for national competitive bidding shall be those set forth in the Law of the Republic of Tajikistan on Public Procurement of Goods.5 million Recruitment Method Quality.

Bidders must be nationals of member countries of ADB. works. Invitations to bid shall be advertised in at least one widely circulated national daily newspaper or freely accessible nationally known website. allowing a minimum of 28 days for the preparation and submission of bids. Bidding Documents 10. 4. No domestic preference shall be given for domestic bidders and for domestically manufactured goods. Advertising 12. and offered goods. 3. 14. 9. Normally. 5. Bid Security 13. 2. Bidding for national competitive bidding contracts estimated at $500. Where required. Bid opening and bid evaluation: (i) (ii) Bids shall be opened in public. 6. post-qualification shall be used unless explicitly provided for in the loan agreement and procurement plan. 8. Procuring entities should use standard bidding documents for the procurement of goods. Prequalification 8. and services acceptable to ADB. eligible bidders (both national and foreign) shall be allowed to participate. 7. and services must be produced in and supplied from member countries of ADB. Bidding Period The minimum bidding period is 28 days prior to the deadline for the submission of bids.000 equivalent or more for goods and related services or $1 million equivalent or more for civil works shall be advertised on ADB’s website via the posting of the procurement plan. bid security shall be in the form of a bank guarantee from a reputable bank. as amended from time to time). works. . Evaluation of bids shall be made in strict adherence to the criteria declared in the bidding documents and contracts shall be awarded to the lowest evaluated bidder. no bidder or potential bidder should be declared ineligible for ADBfinanced contracts for reasons other than the ones provided by section I of ADB’s guidelines. Eligibility 7. accordingly. The eligibility of bidders shall be as defined under section I of ADB's Procurement Guidelines.30 Appendix 6 paragraphs required for compliance with the provisions of ADB’s Procurement Guidelines (2007. Preferences 11. Irrespective of whether post-qualification or prequalification is used.

Government-owned enterprises in the Republic of Tajikistan shall be eligible to participate as bidders only if they can establish that they are legally and financially autonomous. to be awarded a contract financed by ADB. if at any time it determines that the firm or individual has. or in executing. nonsubstantial deviations. fraudulent. 10. they will be subject to the same bid and performance security requirements as other bidders. collusive. coercive or obstructive practices in competing for. Fraud and Corruption 18. A provision shall be included in all national competitive bidding works and goods contracts financed by ADB requiring suppliers and contractors to permit ADB to inspect their accounts and records and other documents relating to the bid submission and the performance of the contract. engaged in corrupt. ADB will declare a firm or individual ineligible. 11. directly or through an agent. No bidder shall be rejected on the basis of a comparison with the employer's estimate and budget ceiling without ADB’s prior concurrence. Rejection of All Bids and Rebidding Bids shall not be rejected and new bids solicited without ADB’s prior concurrence. either indefinitely or for a stated period. The Borrower shall reject a proposal for award if it determines that the bidder recommended for award has. Right to Inspect and Audit 17. directly or through an agent. Furthermore. engaged in corrupt. operate under commercial law. No negotiations shall be permitted.Appendix 6 31 (iii) (iv) (v) (vi) 9. and are not a dependent agency of the contracting authority. fraudulent. Bidders shall not be eliminated from detailed evaluation on the basis of minor. A contract shall be awarded to the technically responsive bidder that offers the lowest evaluated price and who meets the qualifying requirements set out in the bidding documents. or coercive practices in competing for the contract in question. 15. . an ADB-financed contract. 12. 19. and to have them audited by auditors appointed by ADB. Participation by Government-Owned Enterprises 16. collusive.

kV = kilovolt. Manila (TAJ 32513. B. The analysis period includes the construction period and 40 years of operation. Background 1. The economic analysis is based on a time-slice approach to the rehabilitation plan. Land Acquisition O&M Assumptions Conversion factor: 0. O&M higher than existing equipment due to the high-tech nature of gasinsulated switchgear technology 3 years 50 years 11. The calculation for the economic analysis is based on. The Nurek 500 kV Switchyard Reconstruction Project to be funded by the Asian Development Bank (ADB) is part of Tajikistan’s plan to rehabilitate the Nurek Hydroelectric Power Plant (HEPP) and facilities using least-cost planning principles. In the absence of this Project. and they indicated that the Project is economically viable.75 for unskilled labor a Constant 2009 prices 12% None None $60.000 and major overhaul of $200. page 128). approved on 26 November). Manila (TAJ/UZB 35096. Least-Cost Analysis 2. and ADB. Source: ADB.000. 2002.500 GWh Construction Period Economic Life Average Annual Generation GWh = gigawatt-hour. Demand forecasts and cost–benefit projections were prepared and analyzed. benefits. Manila (Loan 1819-TAJ. for $20. page 29). All costs. Manila (July. quoted in ADB. The economic analysis confirms that the Project is economically viable.000 every 10 years. Economic Assumptions 3. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of Tajikistan for the Power Rehabilitation Project. the assumptions included in Table A7. a Asian Development Bank (ADB).250 GWh. ADB. The economic internal rate of return (EIRR) compares the annual streams of economic capital and operating costs against benefits based on willingness to pay. and revenues are expressed in 2009 constant prices. 2001. O&M = operation and maintenance. November. .000. there will be chronic supply shortages. Report and Recommendation of the President to the Board of Directors on Proposed Loans to the Republic of Tajikistan and the Republic of Uzbekistan for the Regional Power Transmission Modernization Project. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grant to the Republic of Tajikistan for the Road Rehabilitation Project. There is no viable alternative to relocation of the switchyards and construction of gas-insulated switchgear switchyards.1: Economic Assumptions Item Shadow Pricing Costs and Benefits Discount Rate Decommissioning Costs Resettlement. approved on 20 December 2000.9 for local materials and 0.1. Details of the assumptions and calculations used for the economic analysis are presented in Supplementary Appendix C. among other things.32 Appendix 7 SUMMARY OF ECONOMIC ANALYSIS A. 2000. Handbook for Integrating Poverty Impact Assessment in the Economic Analysis of Projects. The least-cost analysis serves to show that the Project is the least-cost solution for the reliable supply of power to Tajikistan and to the Central Asian power transmission grid. 500 kV switchyard transmits 7. 2000. C. Table A7.

in regards to the without-project scenario. Barki Tajik monitors the areas for sinkholes. Barki Tajik does not have funds to rehabilitate the whole 500 kilovolt (kV) switchyard at once. Although there is subsidence.500 gigawatt-hours (GWh) due to shutdowns because of subsidence prevention measures and minor landslides. and would rehabilitate the switchyard over a 10-year period using new air-insulated switchgear technology at $1 million per annum on the existing site. As explained in para. In order to avoid the collapse of towers. Quantification of Benefits 6. In the following. the switchyard is assumed to transmit 90% of the total energy of 7. the avoided costs of risk mitigation and of repairs after equipment failures. 5. prevention measures are taken annually with costs increasing by $50. 5.000. There are several options for this valuation: . The avoided cost of risk mitigation and damage repair is expressed in monetary terms as explained above. adds extensions to the legs of the towers and strengthens the foundations with concrete. The benefits of avoided equipment breakdown and avoided geological catastrophes can be quantified in terms of avoided loss of energy. Without-Project Scenario. Valuation of Benefits 9. fills them. During 10 years of rehabilitation. E. Effect of Geological Risk 8. measured in kWh. Effect of Equipment Breakdown 7. 2. for purposes of analyzing the scenario. The economic analysis assumes that. Once rehabilitation is complete. and 90% thereafter. the avoided loss of energy and the avoided mitigation costs are quantified separately for the geological risk and for the breakdown of aging equipment. The impact of loss of energy on the other economies in Central Asia cannot be quantified and is therefore not further considered in the following quantitative analysis.000 per annum. D. this procedure needs to be continued at an annual cost of approximately $30.000 per annum due to increased difficulties of uplifting and/or subsidence as time goes by. but the monetary value of the lost energy also needs to be determined for the economic analysis. Additionally.Appendix 7 33 4. The switchyard is over 35 years old and worn out. The subsidence in the 500 kV switchyard destabilizes the equipment. have to be considered. In the without-project case. Annual output of the Nurek HEPP via the 500 kV switchyard is assumed to decrease by 60% during the 10 years of rehabilitation. The annual cost is increased by $50. this procedure has successfully prevented equipment failure and no energy was lost due to uplifting and/or subsidence. the model assumes 60% of the generated electricity to be transmitted though the 500 kV switchyard. 1. the withoutproject scenario foresees failures of individual components and increased shutdowns forcing Barki Tajik to rehabilitate using its own funds. So far. It is assumed that in the future the mitigation measures will continue to be successful. A catastrophic scenario with regard to a landslide or subsidence has been ignored for purposes of the economic analysis. measured in US dollars.

10 per kilowatt-hour (kWh) and $0. Willingness to Pay 11. while Rogun is planned to be commissioned later. 2002. It is therefore methodologically not justified to value the lost energy in the without-project situation at the cost of unserved energy (damage cost and mitigation cost) or at the willingness to pay. when domestic energy supply is insufficient.50 per kWh for households. F. The economic costs of unserved energy have been estimated in numerous studies. The Power Sector Development Project 2 valued the unserved energy at twice the longrun marginal cost.200 MW) and generation from Sangtuda I and Rogun HEPPs. a major aluminum joint stock company in Tajikistan and by far the largest customer of Barki Tajik) to the gross domestic product of Tajikistan is considered so important that in the winter. The Project was evaluated on the basis of avoided loss of energy. for $850. The value of this energy is then equal to the forgone export tariff. The results are summarized in Table A7.3. but in an emergency situation the energy could be diverted for domestic use. 3. estimated at $0.34 Appendix 7 1. ADB. costs are generally broken down into short. and capital expenditures. and stand-by generators. for $20.042/kWh. Manila (TA 3207-TAJ. approved on 24 June). Cost of Unserved Energy 10.20/kWh based on the cost of auto-generation at a 10% utilization factor. shutdown and restart costs. and over $1/kWh for commercial and industrial consumers. 1999.000. It is more appropriate to use the value of alternative sources of electricity supply. including import from Uzbekistan (currently at $0. Estimates for the cost of unserved energy depend on the country and the consumer category. This amount depends on the uses of electricity and is different for particular groups and consumers. they range between $0.03/kWh. forgone revenues from underutilized production capacities.02/kWh is used. Both plants are built to serve the export market. Long-run costs are mainly identified with the cost of mitigating the effects of power outages with standby generators or by switching completely to self-generation. energy for TALCO is imported from Uzbekistan at an import tariff much higher than the tariff paid by TALCO. or at $0. Manila (TAJ/UZB 25096. 2. 13. Report and Recommendation of the President to the Board of Directors on Proposed Loans to the Republic of Tajikistan and the Republic of Uzbekistan for the Regional Power Transmission Modernization Project. which was also equivalent to the average import tariff. It is unlikely that the Government of Tajikistan will not look for other sources of supply when the supply from Nurek HEPP is interrupted. Short-run costs comprise product spoilage and damage to machinery. Detailed calculations are contained in Table A7. The contribution of the Tajik Aluminum Company (TALCO. Value of Energy Import 12.02–$0. The EIRR and the net present value for the Project has been calculated.000. costs of maintenance (both periodic and capital). Sangtuda is expected to be operational in 2010. approved on 26 November). an average value of $0.and long-run costs. Technical Assistance to the Republic of Tajikistan for Preparing a Power Sector Development Project.015/kWh with a capacity of 1. 1 2 ADB.2. such as candles. Results 14. In the evaluation of ADB projects in the past. In the literature on economic costs of outages. kerosene. 1 the willingness to pay was estimated at $0. The willingness of consumers to pay for electricity is usually derived from the amount spent on other sources of energy when electricity is not available. . For the purpose of the economic analysis.000.

Conclusions.3% and the base case at 36. Source: Asian Development Bank estimates.7%. The Project continues to be viable and sustainable for a reasonable range of downside scenarios.2 NPV ($ million) 130. The implication is that the Project is rehabilitating what is currently a key bottleneck of economic development and needs to be urgently implemented to prevent chronic shortages. The analysis verifies that the Project is economically viable. In general. . On this basis. There are.86 47. O&M = operation and maintenance.3 33.58 EIRR = economic internal rate of return.7 30. The sensitivity of the project economics to changes in key variables was tested and the results are included in Table A7. producing a range of estimated EIRRs of between 24.05 113.91 120. 15.3 24. no alternative options for the Project—location of the switchyard in different sites within the Nurek HEPP compound would give the same economic benefits. however. the Project appears to be economically viable.2. All the scenarios have an EIRR greater than the economic discount rate. but would increase the cost of the Project.Appendix 7 35 Table A7. the EIRRs are not highly sensitive and exceed the economic hurdle rates for scenarios tested. NPV = net present value. 16.2: EIRR and NPV Results Case Base Case 50% Cost Overrun 50% Benefit Reduction 1 Year Delay EIRR (%) 36.

EIRR = economic internal rate of return.88 1.03 Total Benefits 0.00 9.53 61.05 0.78 16.53 1.53 61.58 113.58 61.00 0.00 0.05 0.00 0.03 1.13 1.05 0.00 0.00 Avoided Costs 0.43 61.05 0.98 16.05 0.38 61.48 16.00 0.05 0.05 0.05 0.23 1.00 0.05 NPV 130.00 60.28 1.05 0.83 0.61) (24.00 0.00 15.48 61.00 15.00 15.83 15.58 16.05 0.00 60.38 16.78 1.77 120.05 0.88 15.53 1.00 0.73 61.58 1.05 0.58 61.00 0.68 61.63 16.58 16.00 0.00 15.55 15.05 0.00 0.00 0.00 0.43 16.00 0.00 0.68 1.00 15.00 0.00 0.88 0.00 60.00 15.00 0.98 EIRR 36.05 NPV ($ million) 130.00 15.88 15.43 16.18 1.05 0.00 (9.00 0.33 16.33 16.41) 1.48 1.00 0.00 0.23 16.00 0.01) (14.00 1.53 16.28 16.00 0.28 1.58 1.00 0.3: Detailed Calculations of EIRR and NPV ($ million) Benefits Avoided Energy Losses 0.05 0.38 46.48 16.05 0.00 0.05 16.7% 33.00 0.83 15.05 0.00 60.00 0.00 15.2% 30.86 47.00 15.00 15.00 0.88 16.00 15.00 15.00 0.93 15.05 0.00 60.00 15.38 1.43 1.38 16.00 0.00 0.05 0.33 46.63 61.3% EIRR Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 Net Benefits 0.00 15.00 0.98 1.00 1.61 24.00 15.00 0.08 16.00 0.00 0.93 15. .05 0.53 16.00 Costs Maintenance CAPEX 0.36 Appendix 7 Table A7.00 0.05 0.00 0.00 0.33 1.63 1.18 16.00 0.7% Base Case 100% increase in O&M One-Year Delay 50% Cost Overrun Benefit Reduction 50% ( ) = negative.43 61.63 61.93 1.73 16.18 16.05 0. Source: Asian Development Bank estimates.93 16.00 15.55 16.7% 36.18 0.83 1.05 129.00 15.00 0.00 Operation and Maintenance 0. O&M = operation and maintenance.83 16.88 16.05 0.03 16.28 16.33 16.73 1.23 1.28 1.68 1.2% 24.00 15.05 0. CAPEX = capital expenditure.00 0.18 0.13 16.78 15.00 0.00 15.00 15.48 61.08 1.93 16.68 61.00 15.00 15.98 16.05 0.03 Capital Expenditure 0. NPV = net present value.78 0.28 16.05 0.00 0.63 16.00 0.05 0.78 16.05 0.00 0.91 EIRR 36.01 14.00 45.18 0.00 0.73 1.38 1.48 1.00 0.00 0.00 60.05 0.13 16.83 16.98 17.68 16.05 0.00 0.78 15.00 60.05 0.00 0.63 1.93 0.05 0.00 0.08 16.33 1.98 2.05 0.68 16.00 15.05 0.43 1.00 15.05 0.00 0.00 15.00 0.03 16.41 0.00 15.

Turkmenistan. The new 500 kV switchyard will be constructed on the existing 220 kV switchyard site. which in turn provides the means for reducing poverty. The reconstruction will ensure stable and reliable supply of power. POVERTY ANALYSIS AND STRATEGY A. The spoil bank area once used to be the borrow site to excavate materials for the construction of the Nurek dam body some 30 years ago. 2. except for the spoil bank. It has since been used intensively by Barki Tajik. These items will be monitored by the project management unit and will be reported to ADB through quarterly progress reports. A. as one of the largest power plants in Central Asia. including both skilled and unskilled labor. It also recognizes the urgent need for rehabilitating the energy infrastructure currently in a serious state of disrepair. Poverty Impact Analysis for Policy-Based Lending n/a II. Requirement for education on HIV/AIDS and prohibition of child labor will also be indicated in the Grant Agreement and the bidding documents.Appendix 8 37 SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY Country/Project Title: Republic of Tajikistan/Nurek 500 kV Switchyard Reconstruction Project Lending/Financing Modality: Project / Grant Department/ Division: Central and West Asia Department/ Infrastructure Division I. Kyrgyz Republic. For example. as electricity generated from Nurek HEPP will not be able to be evacuated.000 megawatt (MW) Nurek Hydroelectric Power Plant (HEPP) commissioned in 1972. Key Issues Targeting Classification: General intervention As the Project is the reconstruction of an existing switchyard that feeds power to the national grid. it is not expected to deliver immediate direct benefits to the poor.b The Project will result in approximately 50 new temporary jobs being created for construction. Poverty Analysis 1. Adherence to ADB's core labor standardsc and the Labor Law of Tajikistan (1997) will be included in the Grant Agreement and the bidding documents for the turnkey contract. the contractor for the aforementioned ADB loan subproject leased an abandoned factory yard just a few hundred . Employment opportunities for the poor and vulnerable are also limited as the number of laborers to be hired is minimal. the national power utility. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy The Poverty Reduction Strategy Paper of the Republic of Tajikistan (June 2002) recognizes that availability of adequate infrastructure is an essential element in achieving satisfactory economic growth. The contractor will lease one of the several vacant factory yards available in the vicinity of Nurek HEPP. C. which will contribute to the development of the national economy and. Residential quarters of the laborers to be hired by the Project will be located outside the Nurek HEPP compound due to security reasons. Design Features Opportunity to include a pro-poor design is limited as the Project broadly benefits the economy. Findings of Social Analysis SOCIAL ANALYSIS AND STRATEGY No negative social impacts are envisaged as the Project is implemented within the fenced premises of Nurek HEPP owned by Barki Tajik. The Project is the reconstruction of the existing 500 kilovolt (kV) switchyard of the 3. The Asian Development Bank (ADB)’s country strategy and program update 2006–2008a for Tajikistan also identifies stable power supply as one of its key interventions and mentions this Nurek 500 kV Switchyard Reconstruction Project. and Uzbekistan. therefore. the area was used as a spoil bank to dispose of sediments dredged from the Vakhsh River downstream of Nurek HEPP tailrace in the Vakhsh River Excavation subproject under the ADB Loan 1817-TAJ: Power Rehabilitation Project. can be expected to result in indirect benefits to the poor. B. it plays the role of controlling the frequency of the Central Asian power system. The local government has granted Barki Tajik the use of this plot of land. Both switchyards are in the Nurek HEPP compound. Spoil from excavation will be disposed in the designated spoil bank just outside the Nurek HEPP compound. The existing switchyard is obsolete with limited spare parts available and is also constructed on top of a salt dome where land subsidence has been experienced for over a decade. Nurek HEPP supplies 75% of Tajikistan's electricity and. The loss of the switchyard will have catastrophic ramifications. which includes grids of Kazakhstan. Until recently.

the findings of the social analysis show that the impact of the Project to the community is negligible. Plan Other Action Indigenous Peoples Framework No Action Uncertain . explain why. or any negative social impacts. describe key features and resources provided to implement the plan (including budget. and implementation arrangements.38 Appendix 8 meters from Nurek HEPP. If no. including performance targets. The poor and the non-poor will benefit equally from the Project directly through the supply of electricity from the Project if they are users of electricity and indirectly through the development of the Tajik economy. Key Actions. the Project does not entail land acquisition. No concerns were raised over the Project. resettlement. resources. or opportunities and participation in decision-making process: Gender plan Other actions/measures No action/measure Summarize key design features of the gender plan or other gender-related actions/measures. but a public consultation was held in accordance with ADB's Environment Policy (2002). Provide a summary of the consultation and participation process during the project preparation.). C. and it is judged that a C&P plan is not required. Key Issues There are no gender issues associated with the Project. Consultation and Participation 1. a reliable 500 kV switchyard that evacuates power from Nurek HEPP is beneficial to the entire nation. As explained above. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS b Significant/ Limited/ No Impact No impact Strategy to Address Issue Plan or Other Measures Included in Design Issue Involuntary Resettlement No involuntary resettlement involved in Project. Full Plan Short Plan Resettlement Framework No Action Uncertain Indigenous Peoples No impact No indigenous people impacted by Project. Was a C&P plan prepared? Yes No If a C&P plan was prepared. As Nurek HEPP supplies 75% of the electricity consumed in the country. monitorable indicators. Public consultation was held on 11 September 2008 at the Nurek City Administration Office and attended by approximately 70 participants. B. III. Measures included in the design to promote gender equality and women’s empowerment—access to and use of relevant services. No negative social impacts are envisaged. resource allocation. consultant input. etc. As seen from the above. 2. 2. Gender and Development 1. What level of consultation and participation (C&P) is envisaged during the project implementation and monitoring? Information sharing Consultation Collaborative decision making Empowerment a 3. assets.

including the use of condoms. but potential for diffusion of HIV/AIDS needs to be addressed. IV. 2005. Working conditions should adhere to ADB's core labor standards and the Labor Law (1997) of Tajikistan.000. These items will also be included in the Grant Agreement. 2000. PMU = project management unit. and the PMU will report to ADB through periodical reports.Appendix 8 39 Issue Significant/ Limited/ No Impact Limited impact Strategy to Address Issue Plan or Other Measures Included in Design Labor Employment opportunities Labor retrenchment Core labor standards The number of laborers to be hired is about 50. for $34. etc.). approved on 29 November). Core Labor Standards Handbook. Affordability No impact The Project does not increase production of power or deal with electricity tariff. please specify Limited impact The number of laborers to be hired is about 50. Manila (Loan 1817TAJ. Country Strategy and Program Update (2006–2008): Tajikistan. will be explicitly specified in the bidding document. 2006.000. HIV = human immunodeficiency virus. a ADB. but is limited. . Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grants to the Republic of Tajikistan for the Power Rehabilitation Project. Employment opportunity exists. c ADB. This is not a large number. Plan Other Action No Action Uncertain Contractor's responsibility to educate the laborers on safe sex. Action No Action Uncertain Other Risks and/or Vulnerabilities HIV/AIDS Human Trafficking Others (conflict. It will also be explicitly mentioned as the contractors' responsibility not to hire child labor. Manila. Manila. MONITORING AND EVALUATION Are social indicators included in the design and monitoring framework to facilitate monitoring of social development activities and/or social impacts during project implementation? Yes No AIDS = acquired immunodeficiency syndrome. political instability. b ADB. including unskilled laborers. The PMU shall monitor the working condition and report in its periodical reports to ADB. Plan Other Action No Action Uncertain Adherence to ADB's core labor standards and Labor Law of Tajikistan will be included in the Grant Agreement and the bidding document.

B. Ten general services departments (among them planning. Barki Tajik enjoys autonomous status according to its charter. As for corporate issues. Barki Tajik became a state joint stock holding company. such as the power supply contract with Tajik Aluminum Company (TALCO.480 people. 1. Corporate Structure 2. 4. Financial management assessment questionnaires and field interviews were used to review the present standing of financial management. Financial Management Issues and Mitigating Measures 5. Due consideration has been given to the fact that Barki Tajik is in transition from being a vertically integrated government company to a fully independent corporate entity. the largest industrial consumer with 40% of total consumption). Progress on strengthening corporate governance and financial management is under way. transmission. In March 2006. and sales) report directly to the Barki Tajik chair. Prior to the country’s independence. Barki Tajik has financial and management independence issues that need to be remedied. In 1992. Financial management of Barki Tajik was reviewed and found to be adequate. In 2004. Barki Tajik is the state-owned utility responsible for generation. of whom about 290 work in the head office in Dushanbe. Although it is fully owned by the Government. Tariffs are supposed to be regulated by the Anti Monopoly Commission. repair and maintenance.40 Appendix 9 FINANCIAL ASSESSMENT OF BARKI TAJIK A. accounting. The financial sustainability of the power transmission sector is dependent on timely and accurate (i) submission of tariff applications by Barki Tajik. 1. Introduction 1. the revenue requirement to cover general establishment and administrative expenses. Barki Tajik is managed by a chair and a board of directors appointed by the Government. and (iv) collection of payments from customers. depreciation. 7. this merger was revoked and Barki Tajik separated from the Ministry of Energy and Industry. Barki Tajik has the ability to undertake and fulfill fiduciary requirements for the Nurek 500 kV Switchyard Reconstruction Project. or the financing of new investment projects. (ii) execution of the tariff determination by the Ministry of Economic Development and Trade. Tariff Issues 6. A detailed corporate structure and an analysis of Barki Tajik’s financial management is in Supplementary Appendix D. In the tariff determination. Barki Tajik was incorporated as a commercial entity and a formal separation of operations took place along its business lines. In 2000. The overall staff of the utility is about 11. which played a . and costs are determined by Barki Tajik’s planning department and are submitted to the Ministry of Economic Development and Trade. (iii) notification of the tariff determination by the Government. Barki Tajik was administratively a Government entity. and distribution of electricity in Tajikistan. who also manages issues of great importance. 3. Barki Tajik was merged with the Ministry of Energy and Industry.

After the election in 2007. and collections. 9. operating objectives often have to be revised downwards to a level that can be realistically achieved. tariffs had not been raised for the last 5 years. (ii) partially commercially independent of the Government. The plans and budgets of Barki Tajik and its business units are (i) reconciled and approved as integrated documents.g. Currently. e. however. in order to give Barki Tajik ownership of and responsibility for the funds. and sanctions for deviations from the targets are not workable in such a system of scarcity. Management Independence 13. which instead calls for a high level of flexibility. trying to reach cost-recovery level. neither before the reorganization nor after did the regulator exercise its function of independent tariff setting. billing and collection in the energy sales companies. Due to the general lack of funds. the corporate governance structure of its board should be in accordance with international best practices. The constant shortage of cash renders any planning difficult. As the transition period is in process and Barki Tajik has built capacity for independence from the Government. and (iii) developed to meet commercial needs. after submission by Barki Tajik. the funds are onlent with an interest rate to the utility. The Asian Development Bank (ADB) is currently supporting . the IFIs take comfort from the fact that the Government is serious in its efforts in restructuring and eventual unbundling and privatizing of Barki Tajik. In addition. Funds from foreign donors are given to the Government through the Ministry of Finance who onlends them to Barki Tajik. Barki Tajik currently has satisfactory accounting capacities and established accredited external audit processes in accordance with international audit standards. However. 12. Barki Tajik has developed sufficient in-house functions and systems to handle payments. tariffs were calculated up to 2010 and approved by the President in January 2008. Barki Tajik has direct access to foreign exchange for the purchase of spare parts and other equipment. Financial Independence 10. Even in the cases when the bilateral aid takes the forms of grants. the application for the new tariff is reviewed by the Ministry of Economic Development and Trade and is sent to the Government and is ultimately approved by the President.Appendix 9 41 regulatory role until 2006. monitoring systems.. the Cabinet of Ministers was reorganized and the regulatory body was integrated as a department within the Ministry of Economic Development and Trade. 3. Elaborate planning systems comprising target parameters. but the company is unable to finance new investment and the necessary rehabilitation of its aging power system from its own cash flow. 8. However. The gap is only partially filled by subsidies from the Government. but in the past these have either not been approved or only partially accepted by the Government. billings. However. it is typical that the governments are the ultimate institution in the approval process. there are appropriate sanctions for staff who fail to reach targets for other reasons. Due to the high political and social sensitivity of electricity tariffs in transition countries. The current process is relatively new and before tariff increases for 2008 were approved. Due to pressures from the international financial institutions (IFIs). 11. It is not known if this system will work for tariffs after 2010. 2. On a semiannual basis Barki Tajik proposes tariff increases. Management cannot be held accountable for deficiencies resulting from lack of funds. forward projections are checked by the Government to ensure compliance with approved national socioeconomic policies.

balance sheet. Technical losses are assumed at a constant 13% and commercial losses constant at 2%. Conclusion 19. Receivables are assumed at 10% of revenues and payables 15% of operating costs. Demand is expected to increase 2. Financial projections in terms of the profit and loss account. Financial Performance 14. the weighted average tariff for 2009 is $0. 17. Barki Tajik relied on subsidies from the Government to pay for its commitments.0182 per kilowatthour (kWh) for 2009 and $0. however.01 times and the self-financing ratio is satisfactory from . while collection is assumed at 60% for the first 10 years. Several IPPs are expected to go on line. Based on the most recent tariff determination. Barki Tajik is also starting to plan an investment program. The financial management of Barki Tajik is adequate to carry out the fiduciary duties of the Project. continued support from the IFIs is necessary to improve its corporate planning and management. Thereafter. 16. The projections are based on a consolidated look at the energy sector of Tajikistan and take into account known investments for the medium term. Due to requirements by IFIs such as ADB and the World Bank. and 80% from 2031.42 Appendix 9 Barki Tajik’s restructuring. it has been assumed that the onlending rate will be 5% (in line with current onlending rates to Barki Tajik) and a grace period of 5 years and repayment over 20 years. The debt service coverage ratio stands above 1.080/kWh in 2033. Tariffs are expected to increase from $0. 70% from 2021. costs.025/kWh for 2010. tariffs are increased to accommodate increases in capital costs and cost of power purchases from independent power producers (IPPs) planned to start up in the future. with a thermal plant expected in 2014. and cash flow of Barki Tajik have been prepared for 25 years from 2009 to 2033. Due to the lack of tariff increases in the past years. the Government made the decision to increase tariffs to a point where Barki Tajik would be able to cover its costs. A detailed analysis of Barki Tajik’s financial performance is in Supplementary Appendix D.0182/kWh in 2009 to $0. In terms of financial strength. Depreciation is assumed at 5% of fixed assets. and generation capacity. The results of the financial projections are in Table A9. A detailed analysis of Barki Tajik’s financial projections is in Supplementary Appendix E. 18. D. Barki Tajik is expected to produce enough cash flow to maintain its operation and meet its debt service obligations for its future investment program. starting with creation of a fully independent and operating board of directors. Barki Tajik has not been able to fund its operation and maintenance as it should and its assets have been deteriorating. For the purposes of the projections. The projected revenue is based on the approved tariffs for 2009 and 2010. Barki Tajik is receiving subsidies from the Government but is expected to be self-sustainable due to a renewed commitment from the Government in terms of taxes. The main item of costs in terms of value is the purchase of electricity from the IPPs. As a result. E.4% from 2011. Assumptions for Financial Projections 15. C. giving the ability for Barki Tajik to purchase enough power to supply winter peak demand with excess to be exported. The proposed ADB grant and all other capital requirements would be channeled through the Government to Barki Tajik.

measures are being taken to strengthen the independence and transparency of the system. In terms of management. 20. These steps should be adequate and appropriate. however.Appendix 9 43 2009 onwards. . close support from ADB and other IFIs is necessary.

075 Projected 19.971 16 155 577 114 783 698 713 801 815 31.854 28.0% 193.90x 92.321 30.291 19.7% 40.61x 80.2% (4.77x 45.035 18 500 0.050 25 500 0.010 Actual 0.010 20.993 18.5% 100.6% 150.3% 5.4% 32.3% 3.44x 48.1% 94.6% 1.0% 34.4% 1.83x 3.867 19.05x 5.10x 1.8% 138.2% 69.397 18.035 18 500 0.358 19.16x 36.9% 8.8% 18.035 GWh $/kWh $ million $ million 19 158 104 71 88 88 64 64 64 64 GWh $/kWh $ million 500 0.25x DSCR (total cash available) Lowest DSCR Average DSCR DSCR (operating cash flow) (0.1% 76.299 22.493 0.000 19. .018 Approved 0.4% 26.5% 4.563 32.035 18 500 0.0% 56.025 Projected 0.45x) 71.51x 3.3% Operating Ratio Return on Equity Long Term Debt to Equity Equity Ratio Profit /Revenues ( ) = negative.90x 1.5% 62.3%) 68.6% (11.33x 2.661 18.035 18 500 0.1% 2.553 122 114 86 2.44 Table A9: Financial Projections – Key Assumptions and Results Unit 2007 Actual 17.5% 0.5% 75.3% 56.696 18.0% 26.73x 2.743 2008 Planned 2009 Projected 2010 Projected 2011 Projected 2012 Projected 2013 Projected 2014 Projected 2015 Projected 2020 Projected 2030 Projected 2033 Projected Financial year ending Financials Supply and Demand Total Energy Supplied Total Domestic Demand GWh GWh GWh GWh $/kWh Appendix 9 Net Surplus Energy Projected Domestic Energy Sold Average Tariffs Tariffs Status Export to Afghanistan Tariff of Electricity to Afghanistan Revenues from Afghanistan 0.050 25 Other Export Energy Tariff Profile Total Export Revenues Capital Expenditures Key Results Unit 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2030 2033 Financial year ending Profit and Loss Total Revenue Operating Income Earnings before Tax Earnings after Tax $ million $ million $ million $ million 111 18 (5) (13) 143 45 45 34 203 58 38 29 272 140 117 87 301 165 138 103 308 195 165 123 315 198 166 125 322 111 77 58 329 95 59 45 443 85 47 35 1.050 25 500 0.000 17.05x 6.753 21.05x 71.030 Projected 0.838 19.8% 89.7% 36. kWh = kilowatt-hour.413 18. DSCR = debt service coverage ratio. GWh = gigawatt-hour.025 Projected 0.493 176 17.228 21.905 19.013 Actual 0. Source: Asian Development Bank estimates.25x 1.4% 443.713 24.023 33 35 26 Balance Sheet Total Fixed Assets Long-Term Debt $ million $ million 613 162 409 131 438 151 482 175 524 195 541 207 557 219 572 231 639 238 225 67 123 27 Cash Flow $ million $ million $ million $ million 133 158 (134) 39 (10) 93 23 81 93 164 27 44 89 177 32 56 114 201 53 35 140 204 55 9 67 131 56 7 64 127 61 3 61 125 100 (36) 126 126 66 (66) 48 48 38 (38) Cash after Operations and CAPEX Cash Available for Debt Service Debt Service Financing Ratios times times times times % % % % % 84.462 18.0% 1.19x 65.364 29.035 0.2% 2.0% 142.8% 4.080 Projected 19. CAPEX = capital expenditure.0% 10.034 23.867 19.4% 47.0% 1563.3% 2.823 20.493 17.0% 1.025 Approved 0.1%) 53.1% 272.9% 13.56x 37.108 0.872 18.2% 4.1% 3.025 Projected 0.035 18 500 0.5% 1.000 18.5% 1.948 17.25x 98.9% 57.025 Projected 0.2% 13.025 Projected 0.2% 23.8% 14.558 31.411 20.5% 11.6% 39.2% 46.0% 7.2% 4.

Financial Management and Analysis of Projects. 15% is assumed for this analysis. but. Barki Tajik plans to increase the average end-user tariff to the long-run marginal cost level ($0. the investment scenario does not include this cost as there is no subsidence.e. operation and maintenance. 2 7. is approximately 22% (i. including generation. Cost streams used for the purposes of financial internal rate of return (FIRR) determination—i. Capital costs were estimated in US dollars expressed in constant prices over the construction period of 3 years for the new switchyard. The share of generation in the long-run marginal cost. This tariff needs to cover the entire cost of energy supply. which include physical contingencies at 5% of base costs. $0. . Thus. Capital costs were derived from local sources. and thus in the end-user tariff.. the secured revenue from future energy generation may be attributed to the Project. 1 All financial costs and benefits were expressed in 2009 prices. Manila. However. Assumptions 2. If the switchyard is not reconstructed. Introduction 1.025/kWh) by 2010. The revenue of Nurek HEPP is derived from the share of generation in the cost-covering tariff that has been adjusted for losses.. The relocation and reconstruction of the switchyards does not lead to increased energy generation. The difference between energy generated and energy sold is represented by the system and commercial losses.0055/kWh). 5. 2007. capital investment.000 in 2009. 1 2 ADB. Stuttgart. Due to the unpredictability of geological events. The financial analysis of the Project has been carried out in accordance with the Asian Development Bank’s Financial Management and Analysis of Projects. 4. and thus does not generate incremental increase in revenues. Financial viability was examined by comparing the incremental costs and benefits of withand without-project investment scenarios. The without-project investment scenario comprises the existing facility of the switchyard deteriorating in 5 years and Barki Tajik replacing it with a new air-insulated switchgear system over 10 years due to a lack of funds preventing it from being rehabilitated all at once. and result in a loss of revenue from energy sales. and taxes—reflect the costs of delivering the estimated benefits. not energy generated. Tariff Methodology 6. As the Project will be moved to a different location. transmission. the Project secures the future flow of revenues to Barki Tajik. subsidence prevention costs were included initially at $30.Appendix 10 45 SUMMARY OF FINANCIAL ANALYSIS A. using a conservative approach. escalating by a factor of $50. which is in 2009 prices. this value has to be further adjusted. C.000 per annum due to the increased difficulties of prevention measures year after year. Rehabilitation/Reconstruction of Nurek 500/220 kV Switchyards Fichtner Feasibility Report. However. disrupt the energy supply from the Nurek Hydroelectric Power Plant (HEPP). insurance costs. Target system and commercial losses are 10% in 2012. and distribution. Considering that the end-user tariff refers to energy sold. B. Fichtner. no analysis has been undertaken with regard to landslide and subsidence.e. 3. Price contingencies and interest during construction were excluded from the estimation of capital costs for the purpose of the FIRR. the existing switchyard will gradually break down. 2005.

90) 0. The other assumption includes a domestic annual inflation rate of 5%.90 100. . this was 2. This value is used to calculate the annual revenue of Nurek HEPP. The average cost of government funds is calculated by dividing total government debt servicing by total government debt.53) 4. E. such as debt repayment or alternative investments. Source: ADB estimates.52% (Table A10. The Government’s contribution has opportunity costs.2.54 4. The WACC for the investment program is 2. Gov’t = government. The interest rate was adjusted for the corporate tax rate (25%). Financial Internal Rate of Return The Project’s FIRR is 9. Adjusting the generation tariff by 15% losses results in a tariff of $0.0048/kWh generated. lower than the minimum test rate of 4%. it is assumed that the Asian Development Bank will finance 81.60 5. ADB = Asian Development Bank. Table A10. 10. The Government of Tajikistan would onlend the funds with 25 years tenor to Barki Tajik at 5%. The financial flows of the project are shown in Table A10. reflecting the financial benefit of the Project.73 (0.00 (2.13 18. D.1). since interest payments are tax deductible.86% of the Project costs. For estimating the weighted average cost of capital (WACC).27 3.07 4.00 Internally Generated Fund 12.87 5. The balance will be financed by the Government.00 Total 66.77 81.46 Appendix 10 8.75 3.00 ( ) = negative. Weighted Average Cost of Capital 9.00 2.3%.1: Weighted Average Cost of Capital Item Amount ($ million) Weight (%) Nominal Cost (%) Inflation Rate (%) Real Cost (%) Weighted Component of WACC (%) WACC in Real Cost Minimum Test Rate (4%) ADB Funds Onlent from Gov't 54.00 3. WACC = weighted average cost of capital.13 2.6% in 2004.

06 FNPV 68.54 3.00 0.00 0. FIRR = financial internal rate of return.54 3.00 0.06 0.00 0.06 0.06 0.00 0.14 3.00 0.13 36.06 0.40 14.06) 3.00 0.00 0.30 FIRR Net Revenues 0.00 0.34 14.54 3.00 0.06 0.54 3.00 0.06 0.06 0.06 0.60 3.60 3.60 3.5% 5.54 3.00 0.20 0.06 0.00 0.60 3.54 3.60 3.54 3.60 3.00 0.07 0.3% 9.06 0.60 3.00 0.00 0.00 0.06 0.30 67.60 3.54 3.54 3.00 Operation and Maintenance 0.00 0.54 FIRR 9.06 0.00 0.00 0.06) (0.38 33.00 0. Capital costs include base costs.54 3.00 0.00 (13.06 0.60 3.34 2.40 14.54 3. 2.00 0.60 3.34 14.00 0.54 3.40 3.06 0.06 0.00 0.38) (33.06 0.54 3.07) (0.60 3.06 0.54 3.60 3.06 0.00 0. Notes: 1.06 0.00 3.40 FIRR 9.60 3.60 3.60 3.80 14.2% 6.06 0.54 10.06 0.40 14.00 0.00 0.54 3.34 14.60 3.2: Financial Internal Rate of Return and Net Present Value ($ million) Revenue Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 Incremental Revenues 0.Appendix 10 47 Table: A10.60 3.60 3.06 0.54 3.00 0.60 Capital Expenditure 0.60 3.00 0.60 3.54 3.00 0.06 0.34 14.06 0.06 0.60 3.00 0.40 14.20 0.34 14.06 0.00 0.00 0.40 14.3% Base Case 100% increase in O&M One Year Delay 50% Cost Overrun Tariff Decreased by 50% FNPV 68.06 0.00 0.00 0.8% ( ) = negative.34 3.00 0.3% 2.00 0. FNPV = financial net present value.54 3.54 3.06 0.40 14.00 Costs Maintenance CAPEX 0.74 14. O&M = operation and maintenance.00 0.34 3.54 3.45) (20.00 0.54 3. . CAPEX = capital expenditure.06 0.45 20.06 0.00 13.00 0.00 0.06 0.60 10.54 3.20 0.00 0. physical buy not price contingencies.03 50.06 0.00 0.00 0.06 0.00 0.34 14. Source: Asian Development Bank estimates.60 3. No residual value assumed.06 0.60 3.60 3.06 0.

An analysis was carried out to examine the sensitivity of the FIRR and financial net present value to adverse changes in such key variables. . The costs do not seem to be as sensitive. Appendix 10 Risk Assessment and Sensitivity Analysis 11. a 1-year delay in completion. and a 50% decrease in tariffs (Table 8. The scenarios considered for the sensitivity analyses were a 1-year implementation delay.2). 12. The parameters with the greatest impact on the financial indicators are the reductions in revenue.48 F. a 50% increase in capital costs. The results show that all scenarios having a FIRR above the WACC and the financial net present value is positive. The sensitivity analysis serves to test the effect of changes in key parameters on the indicators of financial viability. it can be concluded that the Project is financially viable. a 100% increase in operation and maintenance costs. Considering that the scenarios are relatively extreme.

The project management unit is the centralized project management unit for the energy sector. foundations and steel structure calculation. Introduction 1. as well as developing and implementing comprehensive project management plans to ensure the efficient. timely. and prepare bid documents accordingly for turnkey contracts in accordance with ADB's Procurement Guidelines. Special attention is required on the interface with the new 220kV equipment and other interfaces with common system and equipment. route alignment. and quality control. Pre-Construction Phase The consultant will be responsible for the following: (i) Review the feasibility study report and recommend to the EA on matters such as the implementation period. 3. 4. Close coordination with the 220 kV project. The consultant will further assist the EA in issuing bid documents. and (ii) construction phase. as amended from time to time) of the Asian Development Bank (ADB). Identify additional data and information requirements. Barki Tajik is the Executing Agency (EA) . but not limited to. evaluating bids. This plan should take into consideration the engineering technology required. the consultant will be responsible for the project management of the contract. detailed cost estimates (foreign exchange and local currency). and economical implementation of the Project. technical specifications. total cost. including. and preparation of bid documents for the single turnkey contracts. and submit an inception report after 1 month of mobilization. and preparing bid evaluation reports to be submitted to ADB. Collect all necessary data at site for the preparation of the conceptual design of the Project. the resources and costs involved. including making recommendations for testing and commissioning of the Project. (ii) (iii) (iv) (v) (vi) . single line diagrams. 1. and the critical time frame for completion of the Project.Appendix 11 49 OUTLINE TERMS OF REFERENCE FOR CONSULTANTS A. Prepare conceptual designs of the Project with sufficient degree of detail in order to bid out the turnkey contracts. B. During the construction phase. Assess whether prequalifications are necessary. line profile. the operation of the Nurek Hydroelectric Power Plant (HEPP). preparation of conceptual designs. and implementation schedule. and the dispatch center is required. The Nurek 500 kV Switchyard Reconstruction Project is the construction of a new 500 kilovolt (kV) switchyard using gas-insulated switchgear technology and the retirement of the existing 220 kV switchyard. Review the specifications and standards adopted in the feasibility study report and compare against those contemplated for the new 220 kV equipment. bill of quantities. The consultant will be responsible during the pre-construction phase for the review of the existing feasibility study. cross-sectional drawing. The consultant will be responsible for preparing conceptual designs and assisting the EA in the procurement of the single turnkey contracts in accordance with the Procurement Guidelines (2007. The consulting service is divided into two phases: (i) pre-construction phase. elaboration of technical specifications. Scope of Consulting Services 2. corridor layout. complexity of project management.

calculations. payment procedures. 2003. . including issuing bids. and preparing bid evaluation reports. Monitor the execution of the Project in line with the project time schedules and the work programs provided by the contractors. prepare any other additional documents such as an environmental impact assessment that may be required under ADB's Environment Policy (2002). responding to requests for clarification of bid documents. Liaise with EA and local government to ensure that all compensation is paid in a timely manner and that the right-of-way is cleared socially and in terms of security (demining). Capacity-building programs should be included in the inception report. monitor costs. organizing site visits. Assist the EA in procurement. Prepare a project implementation manual covering the project organization. 1 and Involuntary Resettlement Policy (2002). consultant. Environmental Assessment Guidelines. delivery. Establish a computerized project monitoring program using off-the-shelf software packages. contractors. opening of bids. Plan and execute capacity-building measures (classroom lectures and on-the-job training) to enhance the EA's capacity in project preparation and procurement. Manila. Participate in contract negotiations and assist the EA in finalizing the contracts. evaluating bids. Environmental Assessment Guidelines. Keep records of all correspondence between the EA. Develop and implement applicable procedures required to ensure adequate control of the manufacturing. 5.50 Appendix 11 (vii) (viii) (ix) (x) Update the initial environmental examination based on the conceptual designs and obtain ADB approval before issuance of the bid documents. Ensure that any land acquisition and involuntary resettlement (LAR) is fully compensated and other requirements stipulated in the land acquisition and resettlement plan are fully implemented before the commencement of works. Ensure that the contractor prepares and implements a project safety plan which is in accordance with national and ADB regulations. The consultant will be responsible for the following: (i) Ensure that the environmental management and monitoring plan for the Project submitted by the contractors are adequate and are in accordance with the initial environmental examination and/or the environmental impact assessment. and project time schedule and quality assurance program. Assist with the implementation and. Review and approve the engineering design drawings. factory tests. assisting pre-bid meetings. periodic revisions of the LARPs and ensure that timely reporting on LARP implementation is carried out and included in the quarterly report. (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) 1 ADB. delivery program. Assist the EA and the local government with necessary public consultations. if necessary. Prepare the overall disbursement plan. and documents submitted by the contractors. and acceptance of the materials and equipment. If recategorization is required. and ADB. and maintain project accounts. Construction Phase 2.

and keep records of any disbursement under the Project. Review and approve the commissioning test reports submitted by the contractors. and promptly reporting any outstanding issues to the EA. and prepare a time frame for the contractor to remedy the deficiencies. and seek ADB approval for. Prepare and issue provisional acceptance certificates for the works as well as for the spare parts. when required. any variation orders to be issued to the contractors. establish the list of deficiencies after commissioning. Review and approve the calculations for protection settings submitted by the contractor. Advise the EA on any contractual or technical disputes that may arise between contractors and the EA during implementation. Considerations such as seasonal or weekly constraints will have to be taken into account. The consulting firm must have sufficient international experience in the planning and execution of 500 kV gas-insulated switchgear substation and 500 kV cable projects. and other reports deemed necessary by the EA and/or ADB. In line with the work programs of the contractors. prepare and advise the EA on the outage planning of existing facilities during implementation. Advise the EA of.Appendix 11 51 (xi) (xii) (xiii) (xiv) (xv) (xvi) (xvii) (xviii) (xix) (xx) (xxi) (xxii) (xxiii) (xxiv) (xxv) (xxvi) Certify invoices. project completion report. The consultant will give special attention to minimizing the impact of the outages on the supply of power. attend the commissioning phase. Identify any problem areas during project implementation. proposing remedial actions. . Capacity-building programs should be included in the inception report. The consultant should hold periodic meetings with the operators for this purpose. Provide advice and support to the EA for the settlement of contractor claims. Prepare the final taking-over certificates along with the final payments to be issued by the EA after the end of the warranty period and the remedy of all deficiencies. The outage planning will be modified and/or updated regularly and will have to take into account any unplanned outages resulting from any faults arising in the network. Prepare monthly progress reports. Plan and execute capacity-building measures (classroom lectures and on-the-job training) to enhance EA's capacity in project management. Update the overall project disbursement schedule and physical target accomplishment periodically. prepare withdrawal applications. 6. Prepare and update on a regular basis the forecast disbursement schedules. Conduct field visits and appropriate tests at regular and appropriate times during construction testing and commissioning. training to the EA on safety planning and safety measures. Establish a monitoring program for the use of the EA. Required Experts and Person-Months 3. quarterly reports. The duration of the consulting services is approximately 40 months. giving advice and. Coordinate safety measures between live components in operation and components under construction. Conduct factory inspections and performance tests within the framework of the contracts. A total of 85 personmonths is required. Review and approve the as-built drawings and operation and maintenance manuals. and must be familiar with projects financed by ADB and the guidelines thereof.

Variation orders and any other documents deemed necessary by the EA and/or ADB will be prepared. survey of quantity when required. and they should include. Pre-Construction Phase. Annual reports will be prepared by the consultants and shall be submitted within 1 month from the end of the year that is being reported. but not be limited to. Reporting Requirements 7. The format of the progress reports shall be drafted by the consultant and endorsed by the EA and ADB. physical progress against the schedule and a plan for the next term. quality test results. safety control. 8. and a draft final report including the conceptual design and bid documents. The consultant will prepare monthly progress reports to be submitted within 2 weeks from the end of the month that is being reported. disbursement against the schedule and a plan for the next term. social issues including land acquisition and resettlement. Construction Phase. environmental monitoring. The consultants will also prepare bid evaluation reports for each contract. .52 Appendix 11 4. and any other issues to be raised. A project completion report will be prepared within 1 month after completion. Quarterly progress reports will be prepared and submitted within 1 month from the end of the quarter that is being reported. The consultant will prepare an inception report after 1 month from mobilization.